SEBI eases IPO rules, allows startup founders to retain ESOPs
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.
