SEBI, the capital market regulator has prohibited employee welfare schemes and listed entities from purchasing their own shares from the secondary market. SEBI break down against unregulated staff welfare and trusts came on concerns that some companies may be financing to deal their own securities in the securities market, which can lead to manipulation of share price by engaging into fraudulent activities.
The companies are not permitted to give any loan, guarantee or other financial assistance for purchase of any stocks in the company or in its holding company. SEBI also ask companies to disclose their employee benefit schemes including the stock purchase agreement with its ESOS (Employee Stock Option Scheme) and ESPS (Employee Stock Purchase Scheme) guidelines. ESOS and ESPS guidelines permit listed companies to reward their employees through stock option schemes and stock purchase schemes.
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