Consider the following statements about the terms related to the capital markets in India:

1. “Offer for sale” is a method of listing for unlisted companies.

2. Employee stock ownership plan (ESOP) are equity shares issued to the creditors of the company in exchange of payment of debts.

Which of the statements given above is/are correct?

Offer for sale (OFS)

• It is a simpler method of share sale through the exchange platform for the listed companies. The mechanism was first introduced by India’s securities market regulator SEBI (the Securities and Exchange Board of India), in 2012, to make it easier for the promoters of the publicly-traded companies to cut their holdings and comply with the minimum public shareholding norms by June 2013.

• The method was largely adopted by listed companies, both state-run and private, to adhere to the SEBI order. Later, the government started using this route to divest its shareholding in public sector enterprises.

Employee stock ownership plan (ESOP)

• It is a type of employee benefit plan, which is intended to encourage employees to acquire stocks or ownership in the company.

• Description: Under these plans, the employer gives certain stocks of the company to the employee for negligible or less costs, which remain in the ESOP trust fund, until the option vests and the employee exercises them or the employee leaves/retires from the company or institution.

• These plans are aimed at improving the performance of the company and increasing the value of the shares by involving stock holders, who are also the employees, in the working of the company. The ESOPs help in minimizing problems related to incentives.