The Securities and Exchange Board of India approved on Wednesday a proposal to allow the founders of startup companies to retain employee stock ownership plans that they were granted at least a year before a firm's initial public offering.
Under existing regulations, promoters are prohibited from holding or receiving share-based benefits like ESOPs. If promoters possess such benefits at the time of filing the draft red herring prospectus, they are required to liquidate them before the IPO.
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This rule has negatively impacted founders classified as promoters during the DRHP stage.
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