Section 54 Issue of sweat equity shares – Companies Act 2013

Amended and updated notes on section 54 of Companies Act 2013. Detail discussion on provisions and rules related to issue of sweat equity shares.

Amended and updated notes on section 54 of Companies Act 2013. Detail discussion on provisions and rules related to issue of sweat equity shares.

Chapter IV (Sections 4372) of the Companies Act, 2013 (CA 2013) deals with the provisions related to share capital and debentures. Section 54 of CA 2013 provides for issue of sweat equity shares.

Recently, we have discussed in detail section 53 (Prohibition on issue of shares at discount) of CA 2013. Today, we learn the provisions of section 54 of Companies Act 2013 read with the Companies (Share Capital and Debentures) Rules, 2014.

Section 54 of the Companies Act, 2013 has been notified by the Ministry of Corporate Affairs (MCA) vide Notification No. S.O. 902(E) issued dated 27.03.2014. This notification was come into force from 1st April, 2014 i.e. the commencement date of section 54 is 1-4-2014.

Name of ActThe Companies Act 2013
Enacted byParliament of India
Administered byMinistry of Corporate Affairs (MCA)
Number of Chapters29
Number of Sections484 (470-43+57)
Number of Schedules7
You are reading:
Chapter No.IV
Chapter NameShare Capital and Debentures
Section No.54
Section NameIssue of sweat equity shares
Monthly Updated EditionCompany Law PDF

Section 54 of Companies Act 2013: Issue of sweat equity shares

Section 54 shall come into force on 1st April, 2014 vide Notification No. S.O. 902(E) issued dated 27.03.2014.

(1) Notwithstanding anything contained in section 53, a company may issue sweat equity shares of a class of shares already issued, if the following conditions are fulfilled, namely:

  • (a) the issue is authorised by a special resolution passed by the company;
  • (b) the resolution specifies the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued;
  • (c) [Omitted]
  • (d) where the equity shares of the company are listed on a recognised stock exchange, the sweat equity shares are issued in accordance with the regulations made by the Securities and Exchange Board in this behalf and if they are not so listed, the sweat equity shares are issued in accordance with such rules as may be prescribed.

(2) The rights, limitations, restrictions and provisions as are for the time being applicable to equity shares shall be applicable to the sweat equity shares issued under this section and the holders of such shares shall rank pari passu with other equity shareholders.

Exception/ Modification/ Adaptation:

1) Clause (c) of subsection (1) of section 54 shall not apply to a Specified IFSC public company. –Notification No. G.S.R. 08(E) dated 4th January, 2017.

2) In case of Specified IFSC private company, clause (c) of subsection (1) of section 54 shall not apply. –Notification No. G.S.R. 09(E) dated 4th January, 2017


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