In corporate finance what name is given to shares of a company that are issued to employees or directors in recognition of the work they have done for the company?

Introduction / Context:
Companies use different types of shares and incentives to reward people who contribute to their growth. One special type of share is issued not mainly for cash investment, but to recognise the effort, expertise or services of employees and directors. This question checks understanding of the term used for such work based share issues.

Given Data / Assumptions:

- The question mentions shares given in exchange for work done by employees or directors. - It is clearly about a reward or compensation mechanism, not about ordinary public share issues. - Four options are given, each naming a category of shares or equity.

Concept / Approach:
Sweat equity shares are shares issued by a company to employees or directors at a discount or for non cash consideration, in recognition of their contribution of know how, intellectual property or value additions. The term sweat reflects the effort put in by the person rather than monetary investment. This concept is defined in company law and used as a recognised form of employee reward. Other terms like preferential shares and secondary shares refer to different aspects of share structure and do not describe this work based reward.

Step-by-Step Solution:
Step 1: Focus on the phrase given in exchange for work done, indicating that labour or expertise is being rewarded. Step 2: Recall that sweat equity shares are specifically associated with rewarding employees or directors for their contributions to a company. Step 3: Understand that preferential shares relate to preferences in dividend or repayment, but are not necessarily linked to work based compensation. Step 4: Secondary shares are shares already held by existing shareholders and sold in the secondary market, not newly issued as recognition of efforts. Step 5: Hot equity is not a standard legal term in company law for this kind of issuance.

Verification / Alternative check:
Company law provisions and business finance texts describe sweat equity shares as a mechanism for startups and established companies to reward key contributors, especially when cash is scarce. They explain that such shares may be issued at a discount and are locked in for a certain period. Exam oriented commerce and economics books explicitly provide the definition that matches the wording of this question, confirming sweat equity shares as the correct choice.

Why Other Options Are Wrong:
Secondary shares relate to trading existing shares in the stock market, not to rewarding work performed. Hot equity is sometimes used informally for popular stocks but is not the legal name of a share class given for services. Preferential shares give holders priority in dividend or capital repayment but are usually sold for cash and are not defined primarily as rewards for efforts.

Common Pitfalls:
Candidates who have only a vague idea of share types may pick preferential shares because the word sounds special. Others may be misled by the phrase hot equity because it appears attractive. A clear memory of the term sweat equity as linking sweat or effort with ownership in the company helps avoid these traps and quickly point to the right answer.

Final Answer:
Shares of a company given in exchange for work done are called sweat equity shares.