What is a Form S-8 Registration Statement?
Registration of securities on Form S-8 (“Form S-8”) is a short-form registration statement under the Securities Act of 1933, as amended (the “Securities Act”), providing significant benefits to small issuers. Form S-8 is available to register securities offered to employees and consultants under benefit plans under limited circumstances. Because a registration statement on Form S-8 is effective upon filing it offers benefits to SEC reporting companies, most significantly that an S-8 registration statement becomes effective upon filing and the shares registered may be issued without a restrictive legend.
As discussed below, the use of Form S-8 is restricted and may only be used by certain issuers under limited circumstances.
In recent years, the misuse of Form S-8 registration statements have been the subject of numerous Securities and Exchange Commission (“SEC”) enforcement actions.
Because of perceived abuses of Form S-8, in 1999 the SEC amended the requirements for the use of Form S-8 registration statements. The amendments stemmed from Form S-8 being used by stock promoters and issuers to orchestrate large illegal distributions of securities by allowing “consultants” to immediately sell their S-8 securities to the public. Frequently, the S-8 proceeds were delivered back to the issuer and used to fund the issuer or compensate stock promoters. According to the Securities and Exchange Commission (“SEC”), S-8 recipients often acted as “conduits” who performed little or no services for the issuer, other than marketing the issuer’s securities and conducting their illegal securities sales, the proceeds of which were being funded back to the issuer or its promoters.
On July 15, 2005, the SEC amended Form S-8 to prohibit its use by issuers who engage in reverse mergers with public shell companies. A shell company is a company that has no or nominal operations, and either no or nominal assets or assets consisting of cash and cash equivalents. S-8 can be used by SEC reporting issuers who go public direct and undertake underwritten or direct public offerings. Issuers should expect an increase in legal and compliance costs with the use of S-8 since it is a registration statement that requires an opinion from an SEC attorney.
Requirements of S-8
While many benefits remain for the use of Form S-8 registration statement, an issuer must strictly conform to the following requirements for the use of Form S-8:
♦ immediately before the time of filing the Form S-8 registration statement, the issuer must be required to file reports under Section 13 or Section 15(d) of the Exchange Act;
♦ the issuer must have filed all reports and other materials required to be filed by Section 13 or Section 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports and materials);
♦ the issuer cannot be a shell company and cannot have been a shell company for at least 60 days before filing of the Form S-8 registration statement;
♦ if the issuer has been a shell company at any time, it must have filed current “Form 10 information” with the SEC at least 60 days prior to the filing date of the S-8 registration statement reflecting its status as an issuer that is not a shell company;
♦ the recipient of shares registered on a Form S-8 registration statement must be a natural person and not a corporate entity;
♦ the S-8 Shares must only be used to compensate a person who provides bona fide services to the issuer;
♦ the services provided must not be in connection with a capital raising transaction;
♦ the services provided must not directly or indirectly promote or maintain a market for the issuer’s securities; and
♦ the agreement for the services provided must be in writing.
Compensation with securities registered on a Form S-8 registration statement are strictly prohibited in the following service categories:
♦ shareholder communications services (i.e. preparation of press releases or other publicly disseminated information regarding the issuer);
♦ arranging for or affecting merger transactions which cause a private company to become publicly traded;
♦ capital raising services;
♦ internet or other newsletter writers who “tout” the issuer’s securities, recommend the issuer’s securities or who otherwise simply discuss the issuer’s business;
♦ spam email services; and
♦ any other service which relates to the publishing or dissemination of information that reasonably is expected to influence the price of the issuer’s securities.
The following are a few of the illegal uses of shares subject to a Form S-8 registration statement that have been subject to SEC enforcement actions:
♦ repayment of loans shares registered on a Form S-8 registration statement;
♦ delivery of the proceeds from shares issued on Form S-8 disguised in the issuer’s financial statements as an investment in the issuer’s restricted securities;
♦ delivery the proceeds from shares registered on Form S-8 disguised in the issuer’s financial statements as a loan; and
♦ payment of an issuer’s bills or obligations with S-8 proceeds.
The Benefits That Remain
♦ A registration statement on Form S-8 is immediately effective upon filing and unrestricted securities can immediately be issued;
♦ S-8 is a short form registration statement which requires an abbreviated disclosure format, much of which is satisfied by incorporation by reference to periodic and other reports filed by the issuer;
♦ Consistent with its regulatory purpose, issuers may use a Form S-8 registration statement to issue free trading securities (subject to volume limitations) to its employees, officers, directors, consultants or advisors as an incentive or for compensation for permissible services; and
♦ S-8 is an alternative to cash compensation.
For more information about SEC Registration statements please visit our blog post at:
For further information about this securities law blog post, please contact Brenda Hamilton, Securities Attorney at 101 Plaza Real S, Suite 202 N, Boca Raton, Florida, (561) 416-8956 by email at [email protected] or visit www.securitieslawyer101.com. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as, and does not constitute, legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.
Hamilton & Associates | Securities Lawyers
Brenda Hamilton, Securities Attorney
101 Plaza Real South, Suite 202 North
Boca Raton, Florida 33432
Telephone: (561) 416-8956
Facsimile: (561) 416-2855