Employee share trusts (EST) of listed companies established with the purchase of shares, unlike employee share option schemes (ESOP), were not subject to shareholder or Colombo Stock Exchange (CSE) approval until May 2001. The rationale for this was that an ESOP would require an increase in the issued capital of the company, whereas an EST, established by the purchase of shares, does not dilute an existing shareholder's holding. If, however, the company was issuing new shares for the purpose of establishing an EST, then the approval of shareholders and the CSE was required. Under the Companies Act (1982), paragraph (b) of the proviso to §55, a company is expressly empowered to give financial assistance towards the purchase of shares to be held by or for the benefit of employees of the company.
January 01, 2002