Sebi's ESOP Rule Overhaul: A Game Changer for Startup Promoters

The Securities and Exchange Board of India (Sebi) has announced a major relief for startup founders looking to go public, with new rules now permitting them to retain Employee Stock Options (ESOPs) granted at least one year before initiating IPO filings.

Previously, founders identified as 'promoters' were required to liquidate such benefits at the time of filing the draft red herring prospectus (DRHP). The updated regulations will enable these key players to continue holding or exercising ESOPs, thus paving the way for more flexible startup transitions to public companies.

This regulatory shift is poised to benefit companies undergoing reverse flipping, where firms change their incorporation from abroad to India, streamlining the process for companies aiming for public listings.

(With inputs from agencies.)