ESOPs Vs RSUs| Personal Finance| Sarthak Ahuja

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#shorts #Startup #RSU #ESOP

How do Restricted Stock Units (RSU) differ from ESOPs?

👉🏼 ESOPs offer the right or the option to the employee to purchase the vested shares in a company at a pre-determined price (exercise price) which is substantially lower than the actual value of the shares

👉🏼 RSUs may place certain additional restrictions on employees, such as the stock entitlement would vest not only by passage of time, but possibly on achieving certain performance milestones at work. Further, RSUs may place restrictions on transferability of shares, etc.

👉🏼 Thus, the difference is primarily with respect to:
1/ ESOP being an option to buy the share, and RSU being an entitlement of the employee in shares
2/ RSU may have more restrictions in place compared to ESOPs to achieve the entitlement

👉🏼 Where can one find Guidelines and Regulations on ESOPs and RSUs:
1/ Companies Act, 2013
2/ SEBI (Share Based Employee Benefits) Regulations, 2014
3/ Indian Accounting Standard 102
4/ Guidance Note on Accounting for Employee share-based payments’ issued by Institute of Chartered Accountants of India
5/ Income Tax Act, 1961 & the Notification No. SO 1021(E), dated 11-10-2001 for Guidelines regarding Employees’ Stock Option Plan or Scheme.

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A Chartered Accountant with about 10 years of experience in areas of Tax Advisory, Startup Consulting, Fundraising, Audits, Deal Advisory, Business Modelling and contract CFO services.

Winner of the ISB Young Leader Award 2017 and the Best All Rounder, PGP Class of '17, Sarthak has also been published about in the leading financial newspapers such as The Financial Express as possibly the youngest Indian to have completed the courses of CA, CS and CMA along with a graduate degree in Financial & Investment Analysis from University of Delhi, all by the age of 23 years.