A company issuing sweat equity shares has to fulfill the following pr…

The correct answer is Option (2) → (A), (B) and (D) only

Sweat equity shares are equity shares a company issues to its own directors or employees at a discount, or for consideration other than cash, for their know-how or the value they add to the company. A company cannot ordinarily issue shares at a discount, so it may issue sweat equity only when certain prescribed conditions are met. Each statement is checked against those conditions.

(A) These shares are of the same class of shares already issued. Correct. Sweat equity must be of a class of shares the company has already issued. The company cannot create a new kind of share only for this purpose.

(B) It is authorized by a special resolution passed by a company. Correct. The members must approve the issue by a special resolution, and the resolution states the number of shares, their price and the directors or employees who will get them. A decision of the board alone is not enough.

(C) These shares must not be listed on any recognized stock exchange. Incorrect. There is no such ban. The condition runs the other way: if the company's shares are listed, the sweat equity shares are issued in accordance with SEBI regulations. A listed company can issue them; it only has to follow SEBI's rules.

(D) Not less than one year has, at the date of issue, elapsed since the date on which the company had commenced business. Correct. The company must have been in business for at least one year on the date of issue. A company in its first year of business cannot issue sweat equity shares.