SARs, in layman language, are indicative of a right issued by a company which entitles the right holder to benefit from the appreciation in value of the company on maturity over a fixed period, if any, in cash or in shares or a combination of both.As is the case with any other investor in a company, the entitlement of a SAR beneficiary grows with the growth of the company and likewise, declines with the downward performance of the company.

At the threshold, SARs appear to be, and are indeed, a promising win-win model wherein the company can have substantial control over risk exposure and capitalization table while the beneficiary of SARs can get an exit in cash at the market value or corresponding shares of the issuer company or both, as applicable, all of which is relatively less onerous than the conventional routes of subscription and / or purchase of shares or ESOP (as defined hereinafter).

However, a deep dive into the legal, contractual, and regulatory nuances of SARs under Indian law, particularly with respect to the eligible beneficiaries of SARs issued by unlisted companies, indicates a faint but lingering possibility of regulatory invasion and arbitrage, as has been dealt with further in this article.

Read More: https://tlegal.com/blog-details/navigating-the-enigma-of-stock-appreciation-rights-for-indian-unlisted-companies-amidst-the-dark-waters-of-statutory-hush