ESOP grant letter.
Per-grantee ESOP grant letter for Indian unlisted companies, including the grant table, vesting schedule, exercise mechanics, and a Section 17(2)(vi) employee tax notice.
The grant letter is what the employee actually sees and signs. It should be short, plain, and unambiguous about what the grant is, when it vests, what it costs to exercise, what happens if they leave, and what the tax implications are. The scheme document does the heavy lifting; the grant letter should be small enough to read at a kitchen table.
This template is the per-grantee grant letter for an Indian unlisted private limited company operating an ESOP scheme drafted under Rule 12. It is the companion document to the ESOP scheme above — every defined term in the grant letter references the scheme by section. The letter is sized to four pages so that an employee can read it in one sitting.
The grant table covers the grant date, the number of options granted, the exercise price per option (with a Rule 11UA reference to the fair value methodology and the IBBI valuer who certified it), the vesting commencement date (which may or may not equal the grant date), the vesting schedule, and the exercise window. The vesting schedule is presented as a worked table showing the date and quantity of each tranche vesting — this is far more useful to the employee than the prose alternative.
The exercise mechanics section explains the mechanics in plain language: when can you exercise, how do you exercise, what does the share certificate look like, how does the company handle the TDS at the moment of exercise, and what does the post-exercise sale look like in terms of capital gains. The Section 17(2)(vi) tax notice is included on the last page in plain English with a worked example at three illustrative exit valuations — this is the single most-asked question employees have about ESOPs and removing the ambiguity early reduces a lot of HR back-and-forth.
Consequences on resignation, termination, death, and disability are summarised in a one-page table that cross-references the relevant scheme sections. A signature block, a witness block, and a return-by date round out the document. This is a scaffold reviewed by an Indian CS and CA.
The whole document.
Every clause and schedule shipped in the DOCX. No surprises after you download.
- Header — grantee name, employee ID, designation, grant date
- Grant table — number of options, exercise price, fair value reference
- Vesting commencement date and the worked vesting schedule
- Exercise window — during employment and post-termination
- Plain-language exercise mechanics — notice, payment, certificate issuance
- Section 17(2)(vi) employee tax notice with a worked example
- TDS handling at exercise — quantum, deduction mechanism, Form 12BA
- Capital gains note on subsequent sale of underlying shares
- Consequences on resignation, termination, death, disability — one-page table
- Change-of-control acceleration cross-reference
- Confidentiality and non-solicit cross-reference
- Acknowledgement and acceptance block
- Return-by date and lapse mechanism
- Schedule — vesting schedule worked example
Timing and trigger.
Issued to each grantee at the time of grant. The grantee should countersign within the return-by window (typically 30 days) or the grant lapses under the scheme's lapse mechanism.
The sections it cites.
Companies Act 2013 — Section 62(1)(b) (employee stock options). Companies (Share Capital and Debentures) Rules 2014 — Rule 12. Income Tax Act 1961 — Section 17(2)(vi) (perquisite on exercise) read with Rule 3 of the Income Tax Rules 1962 (valuation of perquisite) and Rule 11UA (fair value at grant). Form 12BA for employer disclosure of perquisite. The grant letter is the contract between the company and the employee — make sure the scheme it references is the version on file with the MCA and the NRC.
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Honest disclaimer: this is a scaffold, not legal advice. It is reviewed by Indian practitioners but every filing should be reviewed by your own counsel before execution.
Documents that travel together.
ESOP scheme document (Rule 12)
Full Rule 12 ESOP scheme document for Indian unlisted companies — pool authorisation, eligibility, vesting framework, exercise mechanics, exit liquidity provisions.
Founder restricted stock agreement (with vesting)
Restricted stock purchase + reverse-vesting agreement for Indian founders. 4-year vest, 1-year cliff, double-trigger acceleration, good-leaver / bad-leaver mechanics.
Questions buyers ask.
Can promoters and independent directors be granted options under this scheme?+
No. Rule 12 of the Companies (Share Capital and Debentures) Rules 2014 expressly excludes promoters (other than promoter-employees who are in actual employment) and independent directors from ESOP eligibility for unlisted companies. The template enforces this exclusion in the eligibility section. For listed entities, separate SEBI SBEB Regulations 2021 apply.
How does the perquisite tax actually work at exercise?+
On exercise, the difference between the fair market value of the share on the exercise date (per Rule 3 of the Income Tax Rules 1962) and the exercise price the employee actually pays is taxed as a perquisite under Section 17(2)(vi) in the hands of the employee. The company deducts TDS on that perquisite under Section 192 and reflects it in Form 12BA. The capital gains clock starts on exercise — subsequent sale of the share is a separate capital gains event.
Does the scheme need shareholder approval?+
Yes — Rule 12(1)(b) requires a shareholder special resolution to authorise the ESOP pool. The scheme document references this resolution; the EGM special resolution format is included as Schedule A. The MGT-14 filing for the special resolution must be lodged within 30 days.
Has this template been reviewed by a practitioner?+
Yes. Templates are drafted by our editorial team with input from Indian practitioners across corporate secretarial, valuation, and AIF practice. That said, every filing should be reviewed by your own counsel before execution. This is a scaffold, not legal advice.
Can I customise it?+
Yes — open the PDF in any editor that supports text extraction (Word, Google Docs, Pages all paste cleanly from the PDF), or use it as a structural reference for your own draft. Sections are organised modularly so you can keep what applies, swap defaults where flagged, and slot in your facts. Annotations note which clauses are negotiable and which are statutory minimums you can't drop. An editable .docx version is on the roadmap.
Or skip the template
and run the workflow.
See how Company OS runs ESOP from grant to perquisite tax. The template gets you to the first draft; Kapitalyze gets you to the filing, the register update, and the audit trail in one workflow.