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Key Points

SEBI has introduced major changes to IPO regulations that benefit startup founders. The new rules allow promoters to retain employee stock options granted at least one year before filing draft papers. This addresses previous challenges where founders had to liquidate ESOPs before initiating public listing. The move is expected to make the IPO process smoother for startups shifting operations to India.

Key Points: SEBI Allows Startup Founders to Retain ESOPs in New IPO Rules

  • Founders no longer need to liquidate ESOPs before IPO filing
  • Rules apply to ESOPs granted at least one year prior
  • Aims to ease challenges during reverse flipping processes
  • Provides flexibility for startup leaders classified as promoters
2 min read

SEBI eases IPO rules, allows startup founders to retain ESOPs

SEBI eases IPO rules permitting startup founders to keep ESOPs granted at least one year before filing, simplifying the public listing process for Indian startups.

"Employees who are identified as promoters... can now continue to hold or exercise ESOPs - SEBI Official Notification"

Mumbai, Sep 9

In a major relief for startup founders planning to go public, the Securities and Exchange Board of India (SEBI) on Tuesday announced that it has amended its rules to allow promoters to retain employee stock options (ESOPs) granted at least one year before filing IPO papers.

According to the official notification, employees who are identified as promoters or part of the promoter group in the draft IPO documents can now continue to hold or exercise ESOPs, Stock Appreciation Rights (SAR), or any similar benefit, provided these were granted at least one year prior to filing.

Until now, SEBI’s rules did not allow promoters to hold ESOPs or similar share-based benefits.

Founders who held such benefits had to liquidate them before filing draft papers for an IPO, making the process difficult for startup leaders classified as promoters.

The regulator said this change is aimed at addressing challenges faced by founders during the listing process, especially in cases where companies are shifting their base from abroad to India through reverse flipping.

The move is expected to make the IPO process smoother for startups and provide flexibility to founders who received ESOPs before initiating public listing plans.

Meanwhile, earlier this week, the market regulator revised settlement schedules for the equity and derivatives segments in view of settlement holidays declared on September 5 and 8, 2025, by clearing corporations.

According to SEBI, the settlement for the cash and Securities Lending and Borrowing Mechanism (SLBM) segment for the trade days of September 4 (Thursday) and September 5 (Friday) will be undertaken on September 9 (Tuesday).

“The settlement for trades on September 8 (Monday) and September 9 (Tuesday) will be completed on September 10 (Wednesday),” the market regulator said on Monday.

- IANS

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Reader Comments

P
Priya S
As someone working in a startup, this is fantastic news! Founders deserve to benefit from the ESOPs they earned through years of hard work. This will definitely encourage more startups to consider IPOs in India rather than going abroad.
R
Rohit P
Good step but SEBI should also focus on simplifying the overall IPO process for startups. There are still many compliance hurdles that make it challenging for smaller companies to go public.
V
Vikram M
This will particularly help those startups doing reverse flipping to India. Many founders were hesitant because of the ESOP liquidation requirement. Now we might see more companies coming back to Indian markets! 🇮🇳
S
Sarah B
Interesting development. I hope this doesn't lead to promoters having too much control post-IPO though. SEBI should ensure proper governance structures are in place to protect minority shareholders.
A
Aditya G
Bahut accha decision hai! This shows our regulators are actually listening to the startup community. More such progressive changes needed to make India a global startup hub. 👍

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