1. Sweat equity shares are equity shares issued by a company to its directors or employees at a discount for consideration, other than cash, for providing know-how or making available intellectual property rights like copyright, patent or trademark or other value additions. Sweat equity shares of a company can be issued by passing a special resolution with a detailed explanatory statement.

Sweat equity shares to be issued must be valued at a price determined by a registered valuer as the fair value giving justification for such valuation.

Sweat equity shares can be issued only to a permanent employee of the company who has been working in India or outside India, for atleast the last one year with the company;

ESOPs can be by way of the issuance and allotment of shares (a) for cash, based on the fair market value of the shares, (b) for cash on a concessional basis, or (c) on a cashless basis. 

2. The issuance of sweat equity is governed by the 2013 Act read with (i) the provisions of the SEBI (SBEB) Regulations for listed public companies, and (ii) Rule 8 of the Share Capital and Debenture Rules for unlisted companies. Hence, any issuance of sweat equity by an unlisted company would have to be in accordance with the 2013 Act read with Rule 8 of the Share Capital and Debenture Rules.

3. founders receiving sweat equity are can avoid a tax liability by providing no cash or a nominal amount of investment. After the company is incorporated. After incorporating, a founder receiving sweat equity must pay taxes on the amount of equity they receive based on the explanation above.

The IRS will see sweat equity as two separate transactions or events. The labor provided to the company is a single taxable transaction between the founder and the business. The entrepreneur will be taxed on the dollar value of the labor provided. The founder receiving equity is another transaction, where the founder pays the “dollar value of the labor” to receive equity in the company. The founder will pay taxes on the amount of income earned from the “labor provided” and receive equity instead of cash.

Sweat equity shares can be issued by a company at discount or for consideration other than cash to:

permanent employees of company incorporated in India or outside India 

2) Section 2(88) “sweat equity shares”: means such equity shares as are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or making available rights in the nature of intellectual property rights (IPR) or value additions.

3) The sweat equity shares issued to directors or employees shall be locked in/non- transferable for a period of 3 years from the date of allotment and period of expiry of lock in shall be stamped in bold on the share certificate.

4) 

The procedure for valuation of sweat equity shares are as follows:

1. Valued at a price determined by a registered valuer as the fair price giving justification for such valuation

2. After Valuation, registered valuer required to provide a proper report addressed to the Board of directors with justification for such valuation.

Indian overseas investment rules permit foreign companies to issue stock options under its ESOP schemes to employees or directors of their Indian offices (“Foreign Options”) provided that (i) the Foreign Options are offered globally on a uniform basis; (ii) the Indian office files an annual return with details of exercise of the Foreign Options by Indian employees; and (iii) amounts payable on sale of any shares held pursuant to exercise of Foreign Options by Indian employees are repatriated to India within 90 days. The foreign company may also choose to repurchase the granted or vested Foreign Options and/or shares issued pursuant to exercise of Foreign Options in terms of the ESOP scheme/ offer document and, in such a scenario, an annual return is to be filed by the foreign company’s Indian office, specifying the details of remittance. 

Dear Sir,

1) Resident individuals are allowed under General Permission to acquire shares of a foreign entity in part / full consideration of professional services rendered to the foreign entity or in lieu of Director’s remuneration. The limit of acquiring such shares in terms of value shall be within the overall ceiling prescribed for the resident individuals under the Liberalized Remittance Scheme (LRS) in force at the time of acquisition.

2) Acquisition of shares by an employee under Employees Stock Option Scheme without remittance from India is permitted under Regn. 22(1)(ii) of FEMA 120.

Thank you

If you know what sweat equity is then you could not have raised this question at all.

The company may offer such privileges to appease their employees of even higher category in order to induce and retain them. 

It may be allowed as per the prevailing law of that country. 

Whereas you are still an Indian citizen hence you may have to abide by the Indian law alone which was briefly notified to you. 

Thus without even identifying the relief you desire, as per the law of  the country of your residence,  you want to accept the offers being offered to you. 

Instead of getting lured to such unforeseen and uncertain benefits why don't you think about having a straight deal which would be free from all such hindrances and legal hassles. 

The answer to your query is in negative. You won’t be able to own foreign sweat equity because even though Indian overseas investment rules permit foreign companies to issue stock options under its ESOP schemes to employees or directors of their Indian offices (“Foreign Options”) but there are certain conditions or criteria that needs to be followed such as:

• The Foreign company must have an Indian Office;
• The Foreign Options are offered globally on a uniform basis;
• The Indian office files an annual return with details of exercise of the Foreign Options by Indian employees;
• Amounts payable on sale of any shares held pursuant to exercise of Foreign Options by Indian employees are repatriated to India within 90 days.

Unfortunately, the above conditions are not applicable in your case. There seems no other specific permission for subscription of sweat equity shares in a foreign company. 

Hope this satisfies your query ! Best Wishes !