Sebi nod for MphasiS Esop to US arm staff

The Securities and Exchange Board of India (Sebi) has allowed MphasiS BFL (MBFL) to issue stock options to the employees of MsourcE Corporation, a US-based unlisted subsidiary of MphasiS Corporation, which, in turn, is a wholly owned unlisted subsidiary in the US of MBFL, an Indian listed company.

Sebi said, "MBFL is eligible to grant options to the option holders of MsourcE Corporation only if the said option holders fall within the purview of clause 2.1.1 (c) of the employee stock options scheme (ESOS) guidelines."

The Sebi decision, posted on its website, relates to a request made by MBFL, seeking "interpretive letter" as to whether the beneficial exception, as given under proviso to clause 9.1 of Sebi (employee stock option scheme and employee stock purchase scheme) Guidelines 1999 would be available to the option holders of MsourcE.

While clarifying that this decision is relevant only for this case, Sebi has added that "different facts or conditions might require a different result. This letter expresses the (Sebi) division's position on enforcement action only. It does not express decision of the (Sebi) board on the questions presented."

The case refers to the proposed merger of MsourcE Corporation (subsidiary) into the parent MphasiS Corporation. MphasiS Corporation already holds a 69.14 per cent stake in MsourcE Corporation, and is in the process of acquiring the remaining 30.86 per cent held by the minority shareholders of MsourcE.

Post-acquisition, MsourcE is proposed to be emerged into MphasiS Corporation.

MBFL had obtained the approval of its shareholders to issue shares of the company and pay cash, as consideration, to the minority shareholders of MsourcE.

Specifically, MBFL had also obtained shareholder approval to grant, stock options in MBFL to the option holders of MsourcE Corporation as part of the merger since the latter were the employees of the MphasiS BFL Group.

The stock options in the listed MBFL were in lieu of the options held by them in MsourcE. MBFL has also sought the approval of Foreign Investment Promotion Board (FIPB) for issuing such stock options.

MBFL has therefore requested Sebi, under the latter's informal guidance scheme, for a definitive interpretation as to whether the grant of MBFL stock options to employees of MsourcE would be eligible for cover under the employee stock option scheme (ESOS).

To this, Sebi has said that "only such option holders, as are eligible to be granted options under the employee stock option scheme guidelines, are eligible to avail of the benefit under proviso to clause 9.1 of the ESOS guidelines."

As regards the supplementary question of adjusting the period of vesting against the period which MsourcE option holders already have held their options, Sebi has clarified that "the period of holding of options granted by MsourcE by such option holders may therefore be adjusted against the minimum vesting period of one year of the options to be granted to them in MBFL."

This means the option holders in MsourcE will not have to start all over again in the matter of counting the minimum vesting period of one year and the time which they have held the options in MsourcE will be counted towards the vesting period of the new options proposed to be issued.

MBFL had said that "in case of some of the option holders, a period of more than one year has already lapsed since the date of grant of the options, while in case of others, less than one year has lapsed."