What is sweat equity?

What is sweat equity?The phrase ‘sweat equity’ refers to equity shares given to the company’s employees on favorable terms, in recognition of their work. With sweat equity, employees become part owners and participate in the profits, apart from earning salaries. The Companies Act defines ‘sweat equity shares’ as shares issued to employees or directors at a discount, for providing knowhow or making available intellectual property rights or value additions.

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