I’m sure all of my readers know that Form S-8 is used by public companies to register shares that will be issued under an employee stock plan with the SEC.  In it’s January-February 2015 issue, The Corporate Counsel took a closer a look at some of the technical requirements of Form S-8.  Here are a few things I learned from the article.

Fee Offsets Are Complicated

Companies wishing to register shares on a Form S-8 must pay a registration fee to the SEC.  This fee is based on the value of the stock to be issued under the plan and the total number of shares to be issued. Where shares registered under prior S-8 filings will not be issued, companies can use the fees associated with these unissued shares to offset the fees to file a new Form S-8.  But there’s a catch: the offering covered by the S-8 that the fees will be transferred from has to be completed, terminated or withdrawn and the new S-8 has to be filed within five years of when the original S-8 was filed.  Because most stock plans have a term of ten years (and the offering isn’t viewed as completed until there are no further outstanding options/awards under the plan), this means that this offset often available.  This is covered in the Securities Act Rules CDI Question 240.11.

No Share Offsets

Shares cannot be carried forward from one form S-8 to another.  Thus, if shares from an expiring plan (and covered under the Form S-8 filed for that plan) will be transferred to a new plan, the shares have be registered again on the Form S-8 filed for the new plan (and are included in the calculation of the registration fee for the new plan).

New Form S-8 Must Be Filed to Register New Share Allocation

Where shares are newly allocated to an existing plan, a new Form S-8 must be filed to register those shares.  They cannot be registered by amending the prior Form S-8 filed for the plan.  But, the good news is that a abbreviated format can be used for the new Form S-8.  The Corporate Counsel says:

In this scenario, General Instruction E to Form S-8 provides that, for the registration of additional securities of the same class covered by an existing Form S-8 relating to an employee benefit plan, the issuer may file an abbreviated registration statement containing only a cover page, a statement that the contents of the earlier registration statement—identified by file number—are incorporated by reference, the signature page, any required opinions and consents, and any information required in the new registration statement that is not in the earlier registration statement.

Share Counting

I was surprised to learn that it may be not permissible to count share usage for Form S-8 purposes the same way shares are counted against the share reserve.  According to the article:

A recommended approach for dealing with forfeited shares is to treat the original restricted stock grant and the subsequent re-grant as two separate issuances for purposes of counting the amount of shares remaining on the Form S-8. But be aware that when counting shares this way, an issuer can deplete shares registered on Form S-8 faster than it depletes the plan capacity shares, so the issuer should keep a separate ledger for both the Form S-8 and the plan share counting. Also note that this approach might be overly conservative for some practitioners who do not believe that the issuer needs to count the forfeited shares as having been issued against the total, particularly with respect to options. There is also a concern that this approach can lead to problems in determining the real share reserve for other purposes, such as for accounting purposes.

The article further notes:

Options and stock-settled SARs should be counted when exercised for the full gross amount exercised (i.e., unreduced for any net exercise or withholding), while stock awards should be counted when granted. For performance stock awards, the conservative approach is that they should be counted at grant for the target number of shares—with any shares actually issued in excess of target counted at the time of issuance.

– Barbara