Sweat Equity Shares

Sweat Equity Shares

You must have heard the word ‘Sweat Equity Shares”. Now, let us discuss that what it means by sweat equity shares and why it is useful?

Well, in simple words Sweat equity means during the startup phase of the company founders and key employees work hard to develop a Business. And during the initial period of the company, when the company is not in any profit or positive cashflow, it is impossible to give high salaries to its founders and employees for their hours and hours of mind and physical labour work.

So instead of giving salaries and bonus money, the founders issue the shares of the copany to themselves and the employees during initial period. This is known as Sweat Equity. Means you are not getting money here but you are receiving shares instead.

In India, the concept of SWEAT EQUITY SHARES was started by Infosys.Sweat Equity Shares are given to the employees at a discounted rate of market value.The whole idea behind giving Sweat Equity is to make the employee feel that he/she is a part owner in the company.When employees feel their company has their own funds invested in it, they get better motivated and work more earnestly towards company's progress.

Sweat equity shares are the ones given to the employees / people who have been largely involved in building the company from scratch. They do not put any money in the business, but are given the shares as a reward.

Sweat Equity are the shares that are mainly issued to the founders of the company who have developed the Business from Scratch. This is the reward of the risk and time that they have taken in developing a successful Business out of Scratch.