Many small sized organizations prefer to have the Board approving route to make ESOP. Big companies like Tata, Infosys, they either have a Compensation Committee or set up a Trust route to implement ESOP scheme.
For startups, Board of Directors route is best route, rather than creation of a Trust (per Indian Trusts Act)..
The ESOP Trust then allots shares to employees on exercise of their right in exchange of cash and repays its loans.
TRUST SET BY THE COMPANY FOR THE BENEFIT OF EMPLOYEES:
Disclaimer: This article is for informational purposes only. This is not a legal advice or opinion.
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