On September 8, 2025, the Securities and Exchange Board of India (SEBI) officially notified a significant amendment to the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021, through the Extraordinary Gazette Notification No. 5966 GI/2025(1). This amendment, titled the SEBI (Share Based Employee Benefits and Sweat Equity) (Amendment) Regulations, 2025, introduces a new provision aimed at clarifying the eligibility and rights of employees who are classified as promoters or part of the promoter group.
This change addresses a critical regulatory gap concerning how such employees can exercise stock options (ESOPs), Stock Appreciation Rights (SARs), and other share-linked benefits in connection with Initial Public Offerings (IPOs).
What the Amendment Says
The amendment introduces a new Regulation 9A after the existing Regulation 9 in the 2021 Regulations. The key provision can be summarized as follows:
Any employee who is classified as a promoter or part of the promoter group in the draft offer document (submitted to SEBI during an IPO filing) — and who has been granted share-based benefits at least one year prior to the filing date — shall be allowed to hold and/or exercise such options or benefits.
This relaxation is, of course, subject to compliance with:
- The SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021
- Other applicable laws and statutory provisions