Taking Stock

The SEC eases the financial burden of employee stock offerings.
1 min read

This story appears in the March 2000 issue of Entrepreneur. Subscribe »

Have you considered selling stock to your employees, but didn't want to incur the extra expense of filing with the U.S. Securities and Exchange Commission (SEC)? Now the SEC has made the process much easier.

According to Corey Rosen, executive director of the National Center for Employee Ownership, a now-defunct version of the 701 rule under the Securities Act of 1933 made private companies exempt from filing with the SEC only if they offered less than $5 million in stock or 15 percent of total company equity in any 12-month period. The latest change, however, liberalizes registration requirements by removing the $5 million ceiling and setting the maximum amount of securities that can be sold in a year at the greatest of:

  • 15 percent of the issuer's total assets, or
  • 15 percent of the outstanding securities of that class.

Rosen believes the 701 rule is particularly beneficial for companies with 401(k) plans who would like to offer company stock as one of the investment choices.

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