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PRINT THIS PAGE Update on granting stock options in India: 200602/08/2006. Source: Fenwick & West. Fred Greguras, S.R. Gopalan and Tahir Naim
This is a Fenwick & West overview of the legal and strategic issues related to a US parent company granting stock options to employees of its Indian subsidiary, including consideration of exchange controls, securities laws and obtaining possible tax benefits for an optionee. Strategy
Before implementing a compensation scheme, a company must evaluate its likely effectiveness in incentivizing and retaining employees. Options, to the extent they inspire loyalty and commitment and provide employees with a sense of ownership, are an important compensation tool. Indian employees in the information technology and biotechnology sectors generally are familiar with this type of compensation and at least higher level employees view options favorably. Lower level employees may prefer cash.
Securities Law Considerations
India’s securities laws do not impose any restrictions on the grant to employees in India of stock options by a U.S. company. Companies may offer stock options to employees of a subsidiary in India either directly or indirectly. U.S. securities laws will not be an issue so long as the options are granted under a plan which is either in compliance with S.E.C. Rule 701 and applicable state law or has been registered with the S.E.C. on a Form S-8.
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Fenwick & West LLP is a law firm providing comprehensive services to high technology clients of national and international prominence. The firm has over 300 attorneys and a network of correspondent firms in many major cities of the world. Fenwick & West has offices in Palo Alto California, San Francisco California, and Washington DC. For more information please visit www.fenwick.com
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