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All About Employee Stock Option Plan
  • What are ESOPs?
  • How To Trade In Them?
  • Pros and Cons Of ESOPs
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Employee Stock Ownership Plan

Unlisted shares are of majorly 3 types - Pre-IPO Shares, Delisted Shares and Employee Stock Option Plans.

In this article, we will be discussing Employee Stock Ownership Plans (ESOPs), what is ESOP, their advantages and disadvantages, can these shares be sold, if yes, then how to sell them and more. It is important to understand the use and working of ESOP shares to make a more informed decision about whether to opt for it or not.

What is Employee Stock Ownership Plan?

An Employee Stock Option Plan, also known as Employee Stock Ownership Plan, is an investment option given to an employee to buy a certain amount of shares in the company in which they are currently employed.

An employer can offer an option to their employees to buy a specific amount of shares at a pre-determined rate and after a pre-determined tenure. Owning stocks in a firm entails possessing a unit of capital, or a portion of its assets and earnings. If you own stock in a corporation, you can consider yourself a part owner. Employee interests and shareholder interests can be aligned through employee stock ownership arrangements.

Employers offer this option to employees because, if an employee owns stocks in the company, they might put in more effort to help the business succeed. This acts as a motivation for the employee and allows them work in a more productive manner. This option is time-bound and is known as the exercise term.

How Are ESOPs Traded?

ESOPs are seen as a private contract between a company and an employee. As such, those two parties are responsible for arranging the clearing and settlement of any transactions that result from the contract. In addition, the employee is subjected to the credit risk of the company. If the company cannot deliver the stock against the option contract upon exercise, the employee may have limited recourse. For exchange-trade options, the fulfilment of the option contract is guaranteed by the Options Clearing Corp.

Advantages of Employee Share Ownership Plan

  • Financial rewards, linked to individual and organisational performance or a long-term savings and ownership structure;
  • ESOPs increase the sense of belongingness, ownership and association with the company;
  • Improved awareness about the big decisions, directions and corporate plans of the enterprise;
  • There is a better partnership and communication between management and their employees;
  • ESOPs are often linked with employee engagement and involvement and this presents the opportunity to influence decisions about products and process.

Shareholders can choose to sell only a portion of their shares or withdraw money gradually over time. Even after selling their share in the business, they can continue to be engaged. Furthermore, if an employee retires or leaves the company, they have the option to keep their shares, providing them with continued ownership of the business.

Disadvantages Of Employee Share Ownership Plan

  • The employee has all their eggs in one basket. Essentially the employee is over exposed to the company’s shares, so if the company does not perform or worse goes into administration the employees investment is lost (this problem can be minimised by limiting the amount of salary or shares that the employee can buy);
  • The share price can decrease and this can impact the value of the holding for an employee;
  • The employee does not feel they can influence the share price or performance measures and as a result the plan has no value for them.

Reason Why An Employee Would Want To Sell ESOP Shares?

There are various reasons why an employee or an ESOP shareholder would want to sell their shares.

  • The shareholder requires urgent money and wants to encash the shares for it.
  • The shareholder thinks that the price of their shares is at its maximum and wants to sell them at Book Profit.
  • The shareholder wants to sell the shares because the tax paid on the profit gains is too high and is not worth it.
  • The shareholder wants to sell certain shares to get cash and reinvest in various companies to diversify the risk and portfolio.

How Sharescart Can Help You Sell the Shares.

With us, you can sell or liquidate your shares anytime you please. There are a lot of investors in Sharescart that want to invest in various companies and start-ups. We can help you sell your ESOP shares to those investors and get you the money within the comforts of your own home. We follow a quick and hassle-free process.

Step 1:

Equity Details: To help you better we require a few details related to the ESOP shares you want to sell and the price at which you want to sell them.

Step 2:

Affirmation Of Demand: We find out a suitable buyer for you and once you accept the trade we move on to the next step.

Step 3:

Transfer Of Shares To Sharescart: The account details would be provided to you for the transfer of shares. We will notify you about the details needed for the trade beforehand.

Step 4:

Get Payment From Sharescart: Once the transfer is done, the payment would be transmitted to your account within 24 hours, depending on the holidays.

For The Buyers Of The Shares.

Buy Shares Through Sharescart.

Buying shares can never get smoother than with Sharescart. Our team helps you buy the shares you desire and will assist you at every step.

We provide investors with unlimited opportunities to buy shares in various companies, diversify their risk and portfolios and earn multifold profits.

If you are interested in investing in start-ups and want to buy shares, our team can help you out.

Step 1:

Choose Your Desired Shares: You can scan through the companies and decide which company to invest in. Once done, you can tell our team about the desired investment.

Step 2:

Payment To Sharescart: Our team will share the account details so that you can transfer the trade amount into our account. We will notify you about the document needed beforehand.

Step 3:

Delivery From Sharescart: The shares will reflect in your Demat account within 24 hours, depending on the holidays. Our details would be available to you before the transfer.

Step 4:

Portfolio management: We can help you with your portfolios by managing your investments and assisting you in the buying and selling of shares.

Top Unlisted Companies & InstaBuy Companies

Sell or Purchase Share (Tentative Price)

Fundamental Analysis

Company Industry Stock P/E P/B Company rating MCAP (in Cr.) Current Price
Pharmeasy e-Commerce -1.7 1 6756 11
Reliance Retail Retailing 141.5 23 698659 1400
Orbis Financial Finance - Investment 64.1 13.7 3065 325

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