In case you are still confused about the active role of ESOP, you must study well to be well aware of the different functionalities of this plan/scheme. ESOP, also known as Employee Stock Option has been designed to facilitate existing workers and company’s staff members to purchase the shares of their companies beforehand with much confidence. This type of project will certainly help your to consider yourself to be a member of your company. You will be in good financial position by making the deal.
- ESOP will give you a golden opportunity to utilize the scheme for purchasing shares from the company itself. It is just a reward on behalf of the company’s management. Company is very satisfied with your performance track record and therefore it is offering the good option to buy the stocks by future date.
However, simultaneously you must know that if the stocks/shares skyrocket, you will taste the fruit of profits but it can also face nosedive. In this case, you need not get worried and it is up to you to shrug off the option. Now before making any written commitment, you need to know how fantastically ESOP performs and how you will get benefits by taking the chance.
Know the Exercising Process
- Frankly speaking exercise is the process of transforming the given ï¿½ option to stocks or shares. However, to exercise this option, you should pay the exercise fees. It is very urgent to pay the total price. In actuality the exercise price is taken for changing the option to company’s shares.
This type of transfer requires some charges or fees. Suppose if the total price rate is 20 rupees in Indian currency and you desire to exercise 100 options, and then calculate the total exercise price rate. It will be 100X10= Rs1000. However, you must exercise with much care because there is time limit for taking the option.
- The exercise period basically begins from first vesting day. For exercising the option, three accounts should be in activation. You must open the following accounts such as NRO Demat Account, Trading Account and NRO Bank Account (Non Resident Ordinary). There are a number of procedures for completing the exercising process. At first Broker holding trading account takes the full responsibility to hand over ïClient Master Details to the specific applicant/ client.
- At the next step, that client will again transfer the detailed information to his workers or staff members of the company. Later, the company management will be responsible to send back the stocks to the DMAT account of the client. Finally, it is up to the client to keep shares or directly sell those stocks/shares with the help of his personal trading account. In the long run, when the shares will be sold, the cheque will enter into the client’s NRO bank
Check Other Details
However, it is mandatory for the client to collect the ‘Auditor’ Certificates. In addition, he should deliver few details for the issuance of that valuable certificate. He must provide the banking details.
The bank statement will have to show that the money has been shifted from your account to the employer’s account with the sole purpose of buying ESOP. Allotment letter should be prepared in perfect way to steer clear of the future hazard.
When the client will get the no-objection signal for the issuance of the Auditor’s Certificate, he is free to sell the existing stocks/shares in the market. At the last lap, the money collected by selling the shares will be transferred into the client’s trading account.
However, before applying for the option/plan, you must consult the experienced chartered accountant or anyone who has the vast knowledge in this ESOP related field who will give you vital feedback to take right decision.