ABC Tech Solutions Ltd., a non-startup company, has a paid-up equity share capital of 20 crore. The company proposes to issue sweat equity shares…

(i) Rule 8 of the Companies (Share Capital and Debentures) Rules, 2014, deals with the Issue of Sweat Equity Shares.- (1) Rule 8 (1) states that a company other than a listed company, which is not required to comply with the Securities and Exchange Board of India Regulations on sweat equity, shall not issue sweat equity shares to its directors or employees at a discount or for consideration other than cash, for their providing know-how or making available rights in the nature of intellectual property rights or value additions, by whatever name called, unless the issue is authorised by a special resolution passed by the company in general meeting. Rule 8 (6) states that the sweat equity shares to be issued shall be valued at a price determined by a registered valuer as the fair price giving justification for such valuation. Rule 8 (4) provides that the company shall not issue sweat equity shares for more than fifteen percent of the existing paid up equity share capital in a year or shares of the issue value of rupees five crore, whichever is higher. Provided that the issuance of sweat equity shares in the company shall not exceed twenty five percent, of the paid up equity capital of the company at any time. In the given question, Paid-up equity share capital = 20 croreProposed sweat equity shares = 4 crore 15% of paid-up equity share capital= 15% of 20crore= 3 crore The higher of: 3 crore, or 5 crore is 5crore. Since the proposed issue is of 4crore, it is within the permissible annual limit of 5crore. Further, the overall ceiling of 25% of paid-up equity share capital is, 25% of 20crore = 5 crore. The proposed issue of 4crore does not exceed this limit. ABC Tech Solutions Ltd. has also passed a special resolution for the above purpose. Moreover, the shares are proposed to be issued to the CTO for providing specialized technical know-how and developing proprietary software generating future economic benefits, which amounts to know-how and value addition. Therefore, the purpose is also valid under the above mentioned Rules. Hence, the proposed issue of sweat equity shares is valid with respect to both: the maximum permissible limit; andthe purpose for which such shares are proposed to be issued. (ii) As per Rule 8 (3) of the Companies (Share Capital and Debentures) Rules, 2014, the special resolution authorising the issue of sweat equity shares shall be valid for making the allotment within a period of not more than twelve months from the date of passing of the special resolution. In the given case: Date of special resolution is 1st January 2025Proposed allotment date is 15th February 2026 Since the allotment is proposed to be made after expiry of 12 months from the date of passing the special resolution, the special resolution passed on 1st January 2025 will not remain valid for the proposed allotment on 15th February 2026. Therefore, ABC Tech Solutions Ltd. will be required to pass a fresh special resolution before making the allotment on 15th February 2026.