The NASPP Blog

Delaware recently amended its general corporation law to allow boards to delegate authority to approve restricted stock grants to officers (or other people) who aren’t directors.  Just to clarify: it isn’t that the restricted stock is being granted to people who aren’t directors, it’s that non-directors can now approve restricted stock grants.

Background

For well over a decade (ten points if you remember when this law changed), Delaware has permitted boards to delegate authority for approving stock option grants and other rights (generally interpreted to include RSUs) to officers, even if those officers are not board members.  Now the law has been amended to also allow this for restricted stock.

Hold On—Don’t Go Crazy Now

The resolution delegating approval authority must include the following restrictions:

• The maximum number of shares that can be issued
• The time period over which the shares can be issued
• The minimum consideration that must be received for the shares (if the shares are subject to par value, this minimum cannot be less than that amount)

Just as for stock options and other rights, the delegation of authority is solely for determining who receives the awards and the number of shares issued to each person. Vesting requirements and other terms and provisions still must be determined by the board.

Plan Must Allow Delegation

Also, before your board delegates authority to approve restricted stock grants to anyone other than a board member (or committee thereof), the plan must allow this.  Maybe your plan anticipated Delaware eventually changing their laws and already allows this, but there’s probably a pretty good chance it doesn’t.  Luckily, plans can always be amended, oftentimes without shareholder approval.  Amending the plan to allow this delegation of authority should be something that can be accomplished by board action alone.  Thus the board could amend the plan to allow this delegation of authority and then delegate authority under the amended plan at the same meeting; but to safe, make sure they do it in that order.

See the NASPP alert “Delaware Allows Non-Directors to Approve Restricted Stock Grants” for more information.

– Barbara