An Irvine business lawyer can explain that some employers offer their employees stock incentives as part of their compensation packet. Doing so can appeal to prospective employees. However, there are certain legal formalities that must be followed.
The Security and Exchange Commission establishes rules related to various securities. It requires employers to register their securities unless there is an applicable exemption. Private companies are allowed to include securities as part of a written compensation plan without having to register this information with the SEC. This exemption allows start-up companies to provide company stock to help attract officers, partners, directors and employees.
Conditions for Exemption
There are several conditions that a business must be able to meet in order to receive this exemption. For example, the stock must be offered for a purpose other than raising capital. Additionally, the stock must be included as part of a written compensation plan that is provided to all investors. The total value of the stock that is sold cannot be greater than 15 percent of the business’ total assets or outstanding securities or more than $1 million.
Consultants and Advisors
There are special rules that an Irvine business lawyer can explain that pertain to consultants and advisors. For example, they must be natural persons and not mere business entities that provide consulting services.
If you would like more information about how to offer employees stocks as part of a comprehensive compensation plan, contact an Irvine business attorney from Daily Aljian LLP.