Regulation 9A Founder ESOP Treatment

If your founders hold ESOPs and you are heading for an IPO, Regulation 9A is the rule that decides whether they keep them. Patron Accounting structures and defends founder ESOPs under SEBI Regulation 9A, so options and SARs granted before the IPO survive the founder's reclassification as a promoter in the draft offer document.

Founders are usually granted ESOPs as employees, long before any IPO. But when the company files its draft offer document, those same founders are typically reclassified as promoters, and the SBEB Regulations bar promoters from ESOPs. Regulation 9A is the carve-out that lets pre-existing founder grants survive. Getting it right is one of the most valuable things you can do before a listing.

Content is reviewed quarterly for accuracy.

For founder ESOPs to survive under Regulation 9A, each condition must be met. We check them grant by grant:

• Promoter at DRHP: the founder is identified as a promoter or promoter-group member in the draft offer document.
• Granted as a benefit: the benefit is an option, SAR or similar benefit under a scheme.
• One-year rule: it was granted at least one year before the DRHP filing.
• Scheme terms: holding and exercise follow the scheme's own terms.
• Regulatory compliance: it complies with the SBEB Regulations and other applicable laws.

Vested and unvested: the carve-out covers both already-vested and still-unvested benefits, so a qualifying founder does not lose unvested options merely because of the promoter reclassification.

Under Regulation 2(1)(i) and Regulation 9(6) of the SBEB Regulations, promoters and promoter-group members cannot be granted ESOPs. The problem was timing.

A founder is granted ESOPs as an employee while the company is private. When the company decides to go public and files its DRHP, the founder, by virtue of shareholding or control, is reclassified as a promoter. Before Regulation 9A, the regulations neither clearly allowed nor disallowed the exercise of those already-granted ESOPs once the holder became a promoter, leaving founders and companies in genuine uncertainty. Regulation 9A removes that uncertainty for grants made at least a year before the DRHP.

All fees and charges listed are indicative only and do not constitute a binding offer. Final amounts may vary depending on the volume of work and the complexity involved.

Professional service charges for drafting, filing, and representation are separate from the statutory fees. The exact fee depends on the complexity of the case, disputed amount, and number of hearings required. Contact us for a detailed quote.

Get a free Regulation 9A Founder ESOP Treatment consultation - Call +91 945 945 6700 or WhatsApp us. No-obligation assessment.

10,000+ Businesses | 4.9 Google Rating | 50,000+ Documents Processed | 15+ Years

Patron Accounting LLP is a CA and CS firm with 15+ years on SEBI compliance, IPO readiness and founder equity for Indian companies.

With offices in Pune, Mumbai, Delhi and Gurugram, Patron Accounting serves businesses across India, both in-person and remotely.

This page sits within our listed-company ESOP work, alongside SEBI SBEB regulations compliance and the listed-company ESOP annual disclosure and reporting spoke, all delivered through our ESOP management and compliance services.

For the underlying scheme, see ESOP management and compliance services. IPO readiness also needs secretarial audit and statutory audit. See also the full ESOP services hub.

Regulation 9A: inserted into the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations 2021 by the SBEB (Amendment) Regulations 2025, notified 8 September 2025, following the SEBI Board meeting of 18 June 2025 and the 20 March 2025 consultation paper.

The promoter bar: Regulation 2(1)(i) read with Regulation 9(6) bars promoters and promoter-group members from being granted ESOPs; Regulation 9A is the carve-out for pre-existing founder grants.

The one-year test: the options, SAR or other benefits must have been granted at least one year before the filing of the draft offer document, and holding and exercise follow the scheme terms and applicable law.

Companies Act and DPIIT: the listed-company promoter bar mirrors the Companies Act position under Rule 12, where the parallel carve-out is the DPIIT-startup exemption for unlisted companies.

Authoritative sources: the Securities and Exchange Board of India (SBEB Amendment Regulations 2025, Regulation 9A), the SEBI legal framework and notifications, the Ministry of Corporate Affairs (Companies Act, Rule 12), and the Companies Act and Rules.

The one-year clock runs to the DRHP filing, so the window to protect a founder grant closes a full year before you file. A grant made too late simply cannot be cured. If an IPO is anywhere on the horizon, assess founder ESOPs against Regulation 9A now, while there is still time to plan, rather than discovering a problem in due diligence.

Regulation 9A is the single most important rule for founder ESOPs at IPO: it protects genuine pre-IPO grants made at least a year before the DRHP, while keeping the promoter bar intact for opportunistic ones. It is new, lightly charted, and decisive for founder wealth at listing.

Patron Accounting LLP, a CA and CS firm with 15+ years of SEBI and IPO-readiness experience, assesses, structures and defends your founder ESOPs so they survive the move to a listed company.