Updated July 14, 2023
Definition of Form S-8
Form S-8 is a registration form to be filed by public companies in the US, mandated by the provisions of the Securities Exchange Act, 1933 and required by the Securities Exchange Commission (SEC), as a part of any employee benefit plan, after which the public companies will issue securities to its employees. Such reporting helps investors to be protected from fraudulent practices.
What is Form S-8?
- Form S-8 is a registration statement that public companies must file before issuing securities to employees under an employee benefit plan.
- One of the best things about Form S-8 is that it is effective immediately after filing to SEC.
- We need to know the definition of “Employee” here. Employee means any person providing service to the Company in the capacity of an employee, a director, a general partner, a consultant, an advisor, or a trustee. However, the employee should not include someone involved in capital-raising services or market-making activities for the company’s stocks.
- Capital-raising services are those services by which the issuer-company receives the cash proceeds. Market-making activities mean such activities that promote the stocks of the issuer. The instructions to Form S-8 specifically state that this form should not be used for capital raising purposes.
- Before the amendment in 1990, the form required information about the prospectus delivery and included a few disclosure requirements that the issuer filed with the SEC separately. Therefore, the form is called a “Short form registration form.”
- The SEC, however, exempts small offerings or interstate offerings, or offerings made by governments.
- The issuer must pay the SEC registration fees based on the stock value and the quantum of stocks issued.
Advantages
Let’s have a look over its advantages:
- The securities can be traded freely since the issue is effective immediately after filing to SEC.
- The registration statement is short and sweet. Before the amendment in 1990, the form required information about the prospectus delivery and included a few disclosure requirements that the issuer filed with the SEC separately. Therefore, the form is called a “Short form registration form.”
- Long-form registration statements used to take up to 18 months to be effective. After the amendment in 1990, this form was effective immediately. This saves time on the lengthy review process.
- Employees are the ones who work day and out for the turnaround of the company. Thus, Form S-8 compensates for the loyalty the employees received over the years.
- Even with huge reserves, many companies face a cash crunch due to heavy investments made in recent times. Thus, Companies can use this option against cash compensation for employee loyalty.
- Also, issuers can save cash reserves by issuing securities instead of cash compensation. These cash reserves can divert into capital commitments.
Disadvantages
- The present shareholder will suffer dilution of their shareholding in the Company. Thus, compensating employees’ loyalty will ultimately cost the dilution of shares.
- The registration statement demands the registration cost, which is based on the value of a stock.
Considering the advantages over their disadvantages, we can conclude that Form S-8 is a good option.
Registration Requirement of Form S-8?
- The Form S-8 requirements clearly show that these cannot be issued for capital-raising purposes. Further, it restricts the promotion of the stocks or making market of the issuer company.
- The registration statement restricts a company that has been a shell Company within 60 days before filing or which is a shell company at present. So, these companies cannot file Form S-8.
- The issuer company must pay registration fees based on the quantum of stocks to be issued and the value.
- The issuer is required to have reported under Section 13 or Section 15(d) of the Securities Exchange Act, 1933.
- The consultants or advisors receiving compensation in the form of S-8 securities must act bona fide in providing their services to the Company and not under any pressure of holding stocks. Also, there must be an agreement between the issuer and consultants for the services to be provided.
- However, the consultant or advisor should not be involved in promoting the stocks of the issuer.
- The recipient of stock must be a natural person. Thus, corporate persons cannot be entitled to securities under Form S-8.
- Form S-8 prohibits the following employees since these involve promotion or market-making:
- Involved in the management of reverse mergers
- Brokers who attract investors for the company
- Owners of websites who recommend the stocks of the Company or even if they discuss the Company’s business
- Persons involved in providing investor relations services for the issuer
- Persons involved in merger activities on behalf of the issuer.
- The Form S-8 parameters allow consultants or advisors to provide the following services.
- Persons providing book-keeping services to the issuer.
- A person who designs the website of the issuer
- Persons involved in technology development for the issuer
- Involved in banking credit lines
- Product advertising of the Company.
Example of Form S-8
We refer to the website of the SEC for the latest Form S-8 filed by companies at the SEC website.
Example #1
Issue of Securities by 908 Devices Inc.
- The form was submitted on December 26, 2020, by the Company “908 Devices Inc.”
- The issuer is a Non-accelerated filer, small reporting Company, and Emerging Growth Company per Rule 12b-2 of the Exchange Act, 1933.
- The total number of stocks to be registered is 5,591,857, with a price band of $ 1.96 to $ 49.00 per share. The issuer has paid registration fees of $ 12,397.12
Example #2
Issue of Securities by Herman Miller Inc.
- The form was submitted on December 22, 2020, by the Company “Herman Miller Inc.”
- The issuer is an Accelerated filer per Rule 12b-2 of the Exchange Act 1933.
- The total number of stocks to be registered is 7,182,670, with a price band of $ 37.06 per share. The issuer has paid registration fees of $ 29,041.30
Conclusion
- This form is immediately effective after filing, provided the issuer has complied with reporting requirements under Section 13 or Section 15(d) of the Securities Exchange Act, 1933.
- Companies that are shell Companies at present or were shell Companies within 60 days are eligible to file this form.
- Form S-8 requires the least disclosures compared to earlier long-form registrations.
- The consultants and advisors must act in a bonafide manner after the issuance of securities, and there should be an agreement in writing between the issuer and the consultant.
- The company issues Form S-8 to employees, and the definition of employees is broad enough to include major service providers. However, it does not include persons involved in capital-raising activities for the issuer or the market maker of the stocks of the issuer.
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