Big Win for Startup Founders: SEBI Eases ESOP Rules for IPOs
Mumbai, Sep 9: Startup founders dreaming of taking their companies public just got some great news from the Securities and Exchange Board of India (SEBI). On Tuesday, SEBI updated its rules to let promoters keep their employee stock options (ESOPs) if they got them at least a year before filing IPO papers. This change makes the whole IPO process a lot easier for Indian startups.
Under the new guidelines, employees who count as promoters or part of the promoter group in IPO documents can now hold onto or exercise their ESOPs, Stock Appreciation Rights (SAR), or other similar perks. The key condition? These benefits must have been granted at least one year before the company submits its draft IPO filings.
Before this update, SEBI’s strict rules forced promoters to sell off any ESOPs or share-based benefits ahead of an IPO. This often created headaches for startup leaders, especially those classified as promoters. Founders had to liquidate everything, which complicated things during the shift to public listing.
SEBI says this tweak helps solve real challenges for founders, particularly when startups "reverse flip" – that’s when companies move their base from overseas back to India. The goal is to give more flexibility to entrepreneurs who earned ESOPs early on, smoothing out the path to going public.
This move could boost India’s startup ecosystem by making IPOs less daunting. Many founders now have one less worry as they gear up for listing their companies on the stock market.
SEBI Also Updates Settlement Dates Due to Holidays
In other SEBI news, the regulator adjusted trading settlement schedules this week because of holidays on September 5 and 8, 2025, announced by clearing corporations. These changes affect the equity, derivatives, and other market segments.
For trades on September 4 (Thursday) and September 5 (Friday), settlements in the cash segment and Securities Lending and Borrowing Mechanism (SLBM) will now happen on September 9 (Tuesday).
SEBI added that trades from September 8 (Monday) and September 9 (Tuesday) will settle on September 10 (Wednesday). This ensures smooth operations despite the holidays, keeping the Indian stock market running efficiently for investors and traders.
