Paytm's Controversial ESOP Allotment

One97 Communications, the parent company of Paytm, along with its chairman & MD Vijay Shekhar Sharma and his brother Ajay, have reached a settlement with the Securities and Exchange Board of India (Sebi) regarding the wrongful allotment of employee stock ownership plans (ESOPs) just before the company's IPO in 2021.

Under the terms of the settlement, Paytm and Vijay will each pay a settlement amount of Rs 1.1 crore. Additionally, the company will cancel 2.1 crore ESOPs granted to Vijay and another 2.2 lakh ESOPs to Ajay.

Restrictions and Penalties

Vijay will not be eligible to receive any ESOP from any listed company for three years. Ajay, on his part, will disgorge Rs 57.1 lakh, the unlawful gain he made from selling Paytm shares.

Regulatory Violations

Sebi rules prohibit the allotment of ESOPs to promoters and their family members. However, Paytm allotted ESOPs to Vijay and his brother just before filing its IPO papers, with Vijay derecognising himself as a promoter.

Sebi's investigation revealed that Vijay had substantial influence over the decision-making process for the allotment of ESOPs to himself and his brother.

Settlement Without Admission

The parties have settled the case with Sebi without admitting or denying the findings of fact and conclusions of law, marking a significant development in corporate governance and regulatory compliance in India.