Section 54: Issue of sweat equity shares
This section allows a company to issue sweat equity shares under certain conditions and specifies the rights of the holders of such shares.
The section, clause by clause
What the section says
In plain terms
(1)Notwithstanding anything contained in section 53, a company may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely:—
A company may issue sweat equity shares if it has a special resolution authorising the issue, specifying details such as number of shares and class of directors or employees, and if the issue complies with relevant regulations or rules.
(1)(a)the issue is authorised by a special resolution passed by the company;
(1)(b)the resolution specifies the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued; *
(1)1*
(1)(d)where the equity shares of the company are listed on a recognised stock exchange, the sweat equity shares are issued in accordance with the regulations made by the Securities and Exchange Board in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed. *
(2)The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.
Sweat equity shares issued have the same rights and limitations as existing equity shares and their holders have equal ranking with other equity shareholders.
The right-hand column is written from the section text, not quoted from it, and it has no legal force. Where the two differ, the left-hand column is the law.
Amendment notes
- 1. Subs. by Act 1 of 2018, s. 12, for “discounted price” (w.e.f. 9-2-2018).
- 2. Ins. by s. 12, ibid. (w.e.f. 9-2-2018).
- 3. Subs. by Act 22 of 2019, s. 9, for sub-section (3) (w.e.f. 2-11-2018).
- 1. Clause (c) omitted by Act 1 of 2018, s. 13 (w.e.f. 7-5-2018).
This section refers to
Referred to by
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Reproduced from the official India Code print for reference. Check the current text on India Code before you rely on it, and read the section alongside its Rules. Nothing here is legal advice.