In a move to further demonstrate its commitment to disclosure reform despite upcoming changes in the composition of the SEC and its Staff, the agency announced on November 24, 2020 significant amendments to the rules governing offerings of securities to workers. The proposals would impact compensatory issuances of securities by non-reporting issuers (Rule 701) and by reporting companies (Form S-8) and would for the first time permit offerings of compensatory securities to “platform” or “gig” workers who provide services through the issuer’s technology-based platform.
If adopted as proposed, the amendments would result in the following changes:
Rule 701
- Revise additional disclosure requirements for Rule 701 exempt transactions exceeding $10 million;
- Revise the timing of disclosure for derivative securities that do not involve a decision by the recipient to exercise or convert in specified circumstances involving grants to new hires
- Raise two of the three regulatory caps on the amount of securities that a non-reporting issuer may sell pursuant to the exemption during any consecutive 12-month period; and
- Make the exemption available for offers and sales of securities under a written compensatory benefit plan established by the issuer’s subsidiaries, whether or not majority-owned.
Form S-8
- Clarify the ability to add multiple plans to a single Form S-8 and to allocate securities among multiple plans on a single Form S-8;
- Permit the addition of securities or classes of securities by automatically effective post-effective amendment;
- Implement improvements to simplify share counting and fee payments on the form; and
- Eliminate the requirement to describe the tax effects of plan participation on the issuer.
Rule 701 and Form S-8
- Extend consultant and advisor eligibility to entities meeting specified ownership criteria designed to link the securities to the performance of services; and
- Expand eligibility for former employees to specified post-termination grants and former employees of acquired entities.
The proposals relating to “platform” or “gig” workers would add temporary provisions that, for five years, would permit the use of Rule 701 (for non-reporting companies) and Form S-8 (for reporting companies) to issue compensatory securities to such workers, subject to various conditions as to timing, the nature of the technology platform, amount, and (in the case of Rule 701) transferability.
| The proposed rules are subject to a 60-day comment period, though it remains to be seen whether anticipated changes in the Commission and its Staff will impact their adoption. Please direct any questions or observations to Gunster securities law and corporate governance practice leader Bob Lamm. |
YES! PLEASE SIGN ME UP TO RECEIVE EMAIL ALERTS FROM OTHER GUNSTER PRACTICE AREAS.
This publication is for general information only. It is not legal advice, and legal counsel should be contacted before any action is taken that might be influenced by this publication.
| About Gunster Gunster, Florida’s law firm for business, provides full-service legal counsel to leading organizations and individuals from its 12 offices statewide. Established in 1925, the firm has expanded, diversified and evolved, but always with a singular focus: Florida and its clients’ stake in it. A magnet for business-savvy attorneys who embrace collaboration for the greatest advantage of clients, Gunster’s growth has not been at the expense of personalized service but because of it. The firm serves clients from its offices in Boca Raton, Fort Lauderdale, Jacksonville, Miami, Orlando, Palm Beach, Stuart, Tallahassee, Tampa, The Florida Keys, Vero Beach, and its headquarters in West Palm Beach. With nearly 200 attorneys and 200 committed support staff, Gunster is ranked among the National Law Journal’s list of the 500 largest law firms and has been recognized as one of the Top 100 Diverse Law Firms by Law360. More information about its practice areas, offices and insider’s view newsletters is available at www.gunster.com. |
