Founders’ Agreement
Equity, vesting, roles and IP agreed between co-founders.
Startup Services
ESOP Policy & Scheme for Startups
An ESOP policy helps you attract and retain great people with equity. We design your ESOP pool, draft the scheme and grant letters, and complete the approvals and filings.
- 10–15 working days
- ESOP scheme & grant letters
- Board & shareholder approvals
- Tax treatment explained
What is an ESOP?
An Employee Stock Option Plan (ESOP) gives employees the right to buy shares of the company at a pre-determined price after a vesting period. It aligns the team with the company’s long-term success and lets startups offer competitive compensation without using cash.
What the law requires
Unlisted companies grant ESOPs under Section 62(1)(b) of the Companies Act, 2013 and the Companies (Share Capital and Debentures) Rules, 2014. Key requirements include:
- A written ESOP scheme approved by the board and by a special resolution of shareholders.
- A minimum vesting period of one year between grant and vesting.
- Disclosures in the explanatory statement and in the board’s report.
- ESOPs generally cannot be granted to promoters or directors holding more than 10% of shares, but DPIIT-recognised startups may grant ESOPs to such promoters and directors for up to ten years from incorporation.
Tax on ESOPs
Employees are generally taxed as a perquisite when they exercise options and again on capital gains when they sell. Employees of eligible startups can defer the perquisite tax until the earliest of five years from allotment, sale of the shares or leaving the company.
What we deliver
We help you decide the pool size and vesting design, draft the ESOP scheme and grant letters, prepare board and shareholder resolutions, and complete the MCA filings. We can also coordinate the valuation needed to set the exercise price.
Documents required for ESOP Plan
After you purchase, log in to My Account → My Services and upload each document below. Scanned copies or clear phone photos (PDF, JPG or PNG) are fine. Your files are stored privately and seen only by your assigned expert.
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Certificate of Incorporation and MOA/AOA Constitution documents Required
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Current cap table Shareholding of founders and investors Required
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Proposed ESOP pool and vesting terms Pool size, vesting schedule and eligible employees Required
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Shareholders’ agreement If investors have rights over ESOPs If applicable
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DPIIT recognition certificate For startup-specific ESOP relaxations If applicable
ESOP Plan process with Nevo Legal
Plan design
Pool size, eligibility, vesting and exercise terms agreed.
Scheme drafting
ESOP scheme, grant letter and exercise forms prepared.
Approvals
Board and shareholder resolutions drafted and passed.
Filings
Required filings (such as MGT-14) completed with MCA.
Roll-out
Guidance on grants, registers and annual disclosures.
What you get
- ESOP scheme document
- Grant letter and exercise templates
- Board and shareholder resolutions
- MCA filings for the approval
- ESOP register format
ESOP Plan – frequently asked questions
How big should the ESOP pool be?
Many Indian startups set aside 5–15% of their shares for ESOPs, depending on hiring plans and investor expectations.
What is a vesting cliff?
A cliff is a minimum period, usually one year, before any options vest. After the cliff, options typically vest monthly or quarterly.
Can an LLP have an ESOP?
No. ESOPs under the Companies Act are available only to companies. LLPs can use profit-sharing arrangements instead.
You may also need
All Startup Services services Related services
Shareholders’ Agreement
Governance, investor rights and share transfer terms.
Term Sheet Review
Plain-English review of investor term sheets before you sign.
Not sure which service you need?
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