Yesterday, the SEC continued its active year by announcing proposed changes to Form S-8 and Rule 701. The amendments suggested by the 156-page proposing release are responsive to comments that the Commission received on its 2018 concept release. Here are the highlights from the SEC’s Fact Sheet (we’ll be posting memos in our “Form S-8” and “Rule 701” Practice Areas):
With respect to Rule 701, the proposed amendments would:
Revise the additional disclosure requirements for Rule 701 exempt transactions exceeding $10 million;
Revise the time at which such disclosure is required to be delivered for derivative securities that do not involve a decision by the recipient to exercise or convert in specified circumstances where such derivative securities are granted to new hires;
Raise two of the three alternative regulatory ceilings that cap the overall 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.
With respect to Form S-8, the proposed amendments would:
Implement improvements and clarifications to simplify registration on the form, including:
Clarifying the ability to add multiple plans to a single Form S-8;
Clarifying the ability to allocate securities among multiple incentive plans on a single Form S-8; and
Permitting 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, including:
Requiring the registration of an aggregate offering amount of securities for defined contribution plans;
Implementing a new fee payment method for registration of offers and sales pursuant to defined contribution plans; and
Conforming Form S-8 instructions with current IRS plan review practices.
Revise Item 1(f) of Form S-8 to eliminate the requirement to describe the tax effects of plan participation on the issuer.
With respect to both Rule 701 and Form S-8, the proposals would:
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.
-Liz Dunshee, TheCorporateCounsel.net November 25, 2020
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