XYZ Tech Solutions Limited is a growing technology company that has seen significant contributions from its employees and directors in the…

According to section 54 (1) of the Companies Act, 2013, a company may issue sweat equity shares if all of the following conditions are fulfilled: Share of that class must be already issuedIssue is authorised by a special resolution passed by the company;Resolution specifies the details regarding the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued; The special resolution authorising the issue of sweat equity shares shall be valid for making the allotment within a period of not more than 12 months from the date of passing. During a year, the maximum amount/limit for which sweat equity shares can be issued is higher of: 15% of the existing paid up equity share capital orShares of the issue value of rupees 5crore. The issuance of sweat equity shares (cumulative, including all previous issues, if any) shall not exceed 25% of the paid-up equity capital of the company at any time. In the given question, the company has proposed to issue sweat equity shares to the tune of 4crore. However, the maximum limit to which it can issue such shares is- Higher of: 15% of the issued paid up share capital, i.e.3 crore, or 5 crore Thus, company can issue sweat equity shares to the tune of 5crore. However, the company cannot issue such shares more than 25% of the paid-up equity capital= 25% of 20crore= 5 crore. Hence, the company can issue sweat equity shares of 4crore.