A powerful alternative to traditional ESOPs
SARs let you share the value of business growth without requiring participants to purchase shares. Whether you are incentivising consultants, preserving cash, or managing dilution, Vestd India helps you design, issue and administer SAR schemes correctly.
Trusted by thousands of startups and fast-scaling businesses just like you
What are Stock Appreciation Rights?
SARs are an equity-linked compensation instrument that gives participants the right to receive the increase in value of a company’s shares over a specified period. Unlike ESOPs, participants do not purchase shares at an exercise price, they receive the financial benefit of the share value increase directly.
Give participants the right to buy shares
Give participants the value created by the increase in the price of those shares
Can consultants receive ESOPs in India?
No. Under the Companies Act, 2013, ESOPs can only be granted to permanent employees of the company or its holding and subsidiary companies. Consultants and part-time workers are generally not eligible recipients of ESOP grants. For companies looking to provide ownership-linked incentives to non-employees, SARs are often the preferred alternative, since they deliver similar economic upside while offering significantly greater flexibility.
How do Stock Appreciation Rights work?
A SAR scheme typically operates across four stages.
Cash-settled vs equity-settled SARs
SAR schemes can be settled using either cash or equity, depending on the company’s objectives.
The company pays the appreciation value directly to the participant.
- No cap table dilution
- No issuance of shares
- No voting rights created
- Simpler ownership management
- Suitable for advisors and consultants
The company issues shares equivalent to the value of the appreciation generated.
- Preserves company cash reserves
- Creates long-term ownership alignment
- Supports growth-stage compensation strategies
- Reduces immediate cash outflows
Companies planning to settle SARs through equity should establish a dedicated SAR pool, similar to an ESOP pool.
SARs vs ESOPs: what is the difference?
| Feature | SARs | ESOPs |
|---|---|---|
| Eligible for consultants | Yes | No |
| Requires purchase of shares | No | Yes |
| Can settle in cash | Yes | No |
| Can settle in equity | Yes | Yes |
| Immediate dilution | Optional | Yes |
| Creates voting rights | Optional | Yes |
| Requires exercise payment | No | Yes |
| Flexibility of design | Very high | Moderate |
How Vestd India helps companies manage SAR schemes
Designing and administering SAR schemes manually can quickly become complex, particularly as companies scale.
Scheme design
Build customised SAR schemes with flexible vesting, exercise and settlement rules.
Grant management
Issue SAR grants digitally and maintain all participant records in one place.
Vesting administration
Automate vesting schedules and track participant entitlements with ease.
Exercise management
Calculate appreciation values and apply settlement rules automatically.
Settlement support
Support cash and equity settlements while tracking dilution and ownership impact.
Governance & reporting
Maintain audit-ready records and generate board and investor reports with confidence.
Build a SAR scheme that works for your business
Whether you are exploring ESOPs, SARs, RSUs, phantom stock, or other equity and incentive schemes, Vestd India helps you design, manage and administer ownership plans with confidence, all from one connected platform.
See Vestd India in actionFrequently asked questions
Are SARs legal in India?
Yes. SARs are a recognised equity-linked compensation mechanism and are commonly used by private companies, startups and growth-stage businesses.
Can consultants receive SARs?
Yes. Unlike ESOPs, SARs can be granted to consultants, advisors, contractors and other non-employee stakeholders.
Do SARs always result in share issuance?
No. SARs may be settled entirely in cash, allowing companies to avoid dilution.
Can SARs be converted into shares?
Yes. If the scheme permits equity settlement and an appropriate SAR pool has been established, companies can settle SARs through the issuance of shares.
Why do startups prefer SARs?
SARs offer startups flexibility. They allow companies to incentivise key contributors while preserving cash, managing dilution, and avoiding the restrictions associated with traditional ESOP eligibility.