Vijay Shekhar Sharma, founder and CEO of One97 Communications (OCL), and his brother have settled the employee stock options (Esops) case with the Securities and Exchange Board of India (SEBI). The company and Sharma paid Rs 1.1 crore each for settlement whereas Ajay Shekhar Sharma paid Rs 57.11 lakh. In addition, Sharma has been barred from accepting any Esops for the next three years.
In February 2024, SEBI had issued a show-cause notice to One97 Communications, founder Vijay Shekhar Sharma, and his brother Ajay Shekhar Sharma noting that 21 million Esops were granted in October 2021 to him and 226,000 to his brother in May 2022 violated its regulatory provisions.
The notice alleged that founder Sharma reassigned himself as a non-promoter of One97 Communications just prior to filing initial public offering (IPO) documents in July 15, 2021 and created a scheme through arrangement of transfer of a portion of his equity to a family trust controlled by him to continue to exercise control over more than 10% equity directly and indirectly. This circumvented the provisions of SEBI’s share -based employee benefits and sweat guidelines, the notice had said.
Further, SEBI said that Sharma was in a position to influence the decision-making of the Nomination and Remuneration Committee. “It is further alleged that Esops granted to Ajay Shekhar Sharma were under the influence of Vijay Shekhar Sharma as just 10 months ago, the Esops granted to him cancelled citing that Companies Act prohibits issuance of ESOPs to promoter group,” said the SEBI note.
After receiving the show-cause notice, the company had filed for settlement in April 2024 and in March this year, a high powered committee recommended the settlement terms which required cancellation of the 21 million Esops granted/vested and non-exercised upon Vijay Shekhar Sharma along with the cancellation of 222,862 Esops granted/vested upon but not exercised by Ajay Shekhar Sharma.
Ajay Shekhar Sharma’s settlement has also been asked to disgorge Rs 35,86,452 with respect to sale of 3,720 OCL shares obtained upon exercise of the Esops.In April, the settlement division of the market regulator confirmed the compliance with the above terms of settlement.
It is also noteworthy that in recent times, SEBI has proposed allowing founders to exercise employee stock options (Esops) or stock appreciation rights (SAR), even after they are classified as promoters when the companies are about to list through a consultation paper in March. However, said the Esops should have been issued to the person one year before the IPO.