Sweat Equity Valuation (Section 54 Companies Act) Calculator
What is the maximum permissible sweat equity an Indian company can issue under Section 54 of the Companies Act, 2013 and Rule 8(6)?
Financial Inputs
Certified value of intellectual property, patents, or know-how provided by the director/employee.
DPIIT recognized startups enjoy relaxed sweat equity limits under Ministry of Corporate Affairs notifications.
Sweat Equity Shares Issuable
Under Section 54 of the Companies Act 2013, the company can issue up to 20,000 sweat equity shares at ₹100/share, capitalizing ₹20,00,000 of intellectual know-how.
Permissible Issue Consideration Value
20,00,000
Resulting Post-Issue Holding
16.7%
Key Financial Takeaways
- Under Section 54 of the Companies Act 2013, the company can issue up to 20,000 sweat equity shares at ₹100/share, capitalizing ₹20,00,000 of intellectual know-how.
- Recipient receives a 16.7% post-issue equity stake in the company.
- Statutory compliance: All allotted sweat equity shares are subject to a mandatory, non-transferable 3-year statutory lock-in period stamped on the share certificates / demat ISIN.
Frequently Asked Questions
Can sweat equity be issued to promoters of a company in India?
Yes. Unlike ESOPs (which cannot be issued to promoters or directors holding >10% equity under Section 62), Sweat Equity under Section 54 CAN be issued to promoters for providing know-how, intellectual property, or value additions, provided a Special Resolution is passed by shareholders.
Calculators on this platform provide indicative mathematical estimations based on industry-standard financial appraisal models (including Tandon Committee Method II, Nayak Turnover Method, and standard compound amortisation).
They do not constitute a formal facility sanction, credit commitment, or legal advisory from SME PAISA or any partner banking/NBFC institution. Final terms, interest margins, security stipulations, and credit sanctions remain strictly subject to formal credit appraisal, audited balance sheet verification, CMA Data assessment, and risk committee approval by institutional lenders.
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