ISSUE OF SWEAT EQUITY SHARES & PROCEDURE COMPANIES ACT 2013

A Company is huge organisation and from directors to menial workers of a company work to attain the goal and runninrg the business. However, there are some employees which go on a further hard working level to help company accomplish their desired goal or miultifold the profits of the company.

Sweat equity is a party's  contribution to a project in the form of labor,as opposed to financial equity such as paying others to peform the task.Such employees of a company are appreciated not just by way of salary or remuneration hike but also giving something extra for their sweat invested in company. That is why the concept of sweat equity shares in introduced.

The concept of sweat equity was first employed in the United States by the American Friends Service Committee in the Penn Craft self-help housing project beginning in 1937. In India, sweat equity shares was covered under the Companies Act,1956 as well as the Companies act 2013.

As per the section 2(88) of the Companies Act 2013 defines"Sweat equity shares m eans such equity shares as are issued by a company to its directors or employees at a discount or for consideration  other than cash, for providing their know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called

Which companies can issue sweat equity shares?

Any company can issue like

1 One Person company

2  Private Company

3   Public Company

4  Section 8 Company

5    Listed/unlisted/Company

Which employees are covered under the sweat equity allotment scheme

As defined in the definition given under the section 2(88) of the Companies Act 2013, sweat equity shares can be issued by a company to its 

Directors

Employees

Why do companies do sweat equity shares

Any Directors or employees who have worked extraordinarily hard for a particular project or task or acheiving a desired output of the Company in any way are honoured by company by giving equity rights.The companies issue shares to the at discounted prices as compared to market value of shares of company