Employee stock option plans (ESOPs) are a common way to recruit, motivate, and retain workers.
According to a press release issued here, Stock Option Plans allow workers to share in the company’s success without forcing a startup to invest valuable cash.
Employee stock options were previously only available to public corporations.
As a step forward in making the corporate sector more accessible, the SECP has clarified that private limited companies, especially startups, can now give employees ownership rights as a non-monetary reward for their intellectual services and business promotion.
In accordance with section 83(1)(a) of the Companies Act, 2017, a private company may offer shares to its existing shareholders, and if the whole or any part of the shares offered is declined or not subscribed, the shares may be offered to its employees under pre-determined contractual arrangements.
Employee ownership of the organisation for which they operate is a highly motivating factor for increasing efficiency and effectiveness, which startups desperately need in their early stages of operation. Employee stock options are becoming more common in startups around the world, as they may not be able to afford large pay packages for their workers.
As a result, in order to boost business growth in Pakistan, the SECP has given private limited companies, including startups, permission to offer Stock Option Plans, which allow them to award stock options to employees.
