SEBI’s New ESOP Rule Gets a Thumbs Up from India’s Startup Founders

There’s a fresh wave of optimism in India’s startup circles after SEBI announced a major change to its ESOP (Employee Stock Ownership Plan) rules. For the first time, startup founders heading for an IPO can keep their ESOPs even after they’re officially labeled as promoters. This might sound like a technical tweak, but it’s a big deal for anyone building a company from scratch.

 

Here’s why everyone’s talking about it:

 

Before this change, founders had to give up their ESOPs once their company went public. That rule never really fit the startup world, where founders often take low salaries and rely on ESOPs as a reward for years of hard work and risk.

 

Now, as long as the ESOPs were granted at least a year before filing for an IPO, founders can keep or exercise them after listing. The only catch is that these grants have to be clearly disclosed in the IPO paperwork.

 

The reaction from the startup community has been overwhelmingly positive. Founders and investors say this move finally puts India’s rules in line with how modern startups work. It should help keep founders motivated and invested in their companies even after going public.

 

This change is also expected to encourage more startups to list in India, instead of moving overseas, and could help attract more homegrown investment.

 

In short, SEBI’s move is being seen as a long-overdue nod to the realities of building a startup—and founders are here for it.

 

Source: Moneycontrol, Economic Times, The Hindu Business Line