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Sweat equity: principle, procedure and right recipients in India, United States and Japan: A comparative analysis

Sambhav Sogani (Rajiv Gandhi National University of Law, Patiala, India)
S. Nagashayana (Rajiv Gandhi National University of Law, Patiala, India)

Journal of Financial Crime

ISSN: 1359-0790

Article publication date: 19 July 2011

Abstract

Purpose

The issuance of sweat equity shares has recently created controversies. The limitations backing the conservatism of sweat equity shares issuance can be ascribed to confabulating recipient recognition process, uneasy tax treatment and procedural inconsistencies. This paper aims to study the theoretical and legal underpinnings, rightful recipients and the procedure for issuing sweat equity shares.

Design/methodology/approach

The authors choose the jurisdictions of India, the USA and Japan to study the problems plaguing issuance of sweat equity shares. The USA's prototypical reference and burgeoning technical soundness coupled with the sound venture capitalism of India and Japan has inspired the choice. The regulatory regime subsisting in the above jurisdictions governing sweat equity is studied comprehensively and comparatively. The structuring of sweat equity transactions and the tax treatment of sweat equity shares in the USA, India and Japan are discussed.

Findings

It is found that due to the absence of set standards and precedents the method for identifying the right recipients has trembled abysmally.

Originality/value

The paper focuses on the issues surrounding the practice of employees contributing to an organization being remunerated through shares.

Keywords

Citation

Sogani, S. and Nagashayana, S. (2011), "Sweat equity: principle, procedure and right recipients in India, United States and Japan: A comparative analysis", Journal of Financial Crime, Vol. 18 No. 3, pp. 254-267. https://doi.org/10.1108/13590791111147479

Publisher

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Emerald Group Publishing Limited

Copyright © 2011, Emerald Group Publishing Limited