The fairness of sweat is literally rewarding the sweat of the forehead. It is a fair way to recognize all non-monetary contributions of workers to the company. Since it is an immaterial undertaking, the valuation of welded capital must be carried out with the utmost care in order to sufficiently compensate for an employee`s contribution. The terms of compensation for welding capital are legalized by a sweat equity agreement. 1. Ensure that the share capital increased by the planned issuance of close-knit shares is within the company`s authorized capital and, where this is not the case, the necessary measures must be taken to increase the company`s authorized capital. [See procedure for increasing the company`s authorized share capital]. 5. In the case of close-knit shares issued during a balance sheet period, the book value of the close-knit shares is treated as a form of compensation for the employee or director in the company`s financial statements if the sweat shares are not issued due to the acquisition of an asset. [Rule 8 (11) corporate (equity and bond) rules, 2014] The easiest way to calculate welded capital is to divide the investor`s contribution by the percentage of equity it represents.
In this case, $300,000 is divided by 10% $3 million. Since your investment was already $2 million, you have just created a $1 million welding capital, which will help you recruit new talent. And an equity sweat deal will legalize the offers. (h) the names of directors or staff members to whom the welded shares are issued and their relationship with the promoter or/and management staff; (d) the total number of shares to be issued as welded funds; 18. If the shares are held in physical form, you will issue the Allottees shares in the form of FORM SH-1 or as close as possible within two months of the date of the allocation of the shares. [section 56(4,b)] The Certificate of Action indicates the name or names of the person or persons for whom the certificate is issued, the shares to which it relates, the amount paid and the fact that the shares are blocked and the duration of the expiry of the ban is stamped handsomely or in some other significant way. (Rule 5, paragraph 2, and Rule 8, paragraph 5, companies (equity and bonds), 2014 7. The company convenes another board meeting for the allocation of these shares and allocates sweat equity to the potential employee. Before delving deeper into the calculation of welding capital, it is important to evaluate the candidate you want to evaluate. Understanding an employee`s work experience and potential contribution to the business determines the welding capital.
As a start-up, you should avoid making the mistake of overestimating a new employee. Such mistakes for a start-up company will be expensive later if you really need stock options to attract investors.