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Home / Company Law & Secretarial Services / ESOP Trust Set-up
Last updated: 2 October 2026
An employee welfare trust can hold shares for your ESOP — keeping the cap table clean and giving employees a way to exit. Our team drafts the trust deed, sets up the trust and aligns it with your ESOP scheme and the Companies Act.
In a trust route, the company sets up an employee welfare trust. The trust acquires shares — by fresh allotment or by purchase — and transfers them to employees when they exercise their options. It can also buy shares back from employees who leave, giving them liquidity.
A trust adds set-up cost and yearly administration, so it suits companies with a larger or longer-term ESOP programme.
Based on the Companies Act, 2013, Rule 12 of the Share Capital and Debentures Rules, 2014 and the Indian Trusts Act, 1882. Last updated: 27 September 2026.
Document that creates the employee welfare trust
Allows financial assistance to the trust within limits
The trust holds pool shares as a single shareholder
Trust can buy back shares from leaving employees
The trust needs its own PAN and bank account
Apply to trusts of listed companies
Trusts need clear rules to work smoothly over years.
Trust deed and ESOP plan contradict each other on exercise or exit.
Company loans to the trust made without the required approvals.
Trust accounts, tax returns and minutes neglected.
Trusts work alongside other employee equity tools.
Direct ESOP route.
Cash-settled alternative.
Transfers to and from the trust.
Registering a trust.
We confirm the trust route suits your ESOP plans.
Trust deed drafted and aligned with the ESOP plan.
Trust registered; PAN and bank account opened.
Board and shareholder approvals for funding.
Trust acquires shares for the pool.
Procedures for exercise, transfer and buy-back.
A trust has its own records and filings.
Trust accounts kept and audited where required.
Trust income tax return filed.
Shares transferred to employees on exercise, with records.
Trust holdings reflected in company registers and filings.
Share your query and our team will reply during business hours.
A trust holds the ESOP pool as one shareholder, simplifies the cap table and can buy shares back from employees who leave.
Yes, within the limits and approvals for financial assistance under section 67 of the Companies Act.
No. Most unlisted companies grant ESOPs directly; a trust is an option for larger or longer-term programmes.
Trustees appointed under the trust deed, who must act in the employees’ interest.
Yes. SEBI’s share-based employee benefits regulations apply.
ACS – Director, Expertvuw Management Pvt Ltd
This work is handled by Expertvuw’s team, with filings made on the MCA portal. Certifications and audits required by law are issued by independent practising professionals engaged for your case.