Sweat Equity Shares As Per Companies Act 2013 : A Complete Analysis

“SECTION 2(88) ‘Sweat equity shares’ means Equity shares issued by the company to its employees or directors at a discount or for consideration other than cash for providing know-how or making available rights in the nature of intellectual property rights or value addition by whatever name called.”

Put simply; The term sweat equity is all about a person or company’s contribution toward a business venture or other project. Sweat equity is generally not monetary and, in most cases, comes in the form of physical labor, mental effort, and time. Sweat equity basically refers to the amplifying value of a project or venture by providing your physical labor, mental capacity, or time.

Why Sweat Equity Shares?
So the answer is, that Sweat Equity allows a company to raise funds without increasing debt levels. Usually, this option is opted for by start-ups that are at the seedling stage since they tend to face complications in raising capital and obtaining too much debt at an early stage which can cripple their business at the starting stage.

Therefore, here comes the role of sweat equity shares which provides companies with a platform to get “ easy money” or “free money” just by selling a part of a company’s stock to its internal investors.
To know more, visit at: https://www.registerkaro.in/post/section-54-of-companies-act-2013
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