I’ve already blogged about the SEC’s proposal to modernize both Rule 701 (see “SEC Proposes Updates to Rule 701”) and Form S-8 (see “SEC Proposes Updates to Form S-8”). In today’s blog entry, I cover a separate proposal from the SEC which would temporarily expand Rule 701 and Form S-8 to cover issuances of stock to certain gig workers.
Currently, both Rule 701 and Form S-8 can only be relied on for issuances of stock to employees, nonemployee directors, and consultants. Gig workers, which the SEC refers to as “platform workers,” arguably don’t fit into any of these categories of service providers. Thus, neither Rule 701 nor Form S-8 can be relied on to issue stock to gig workers. There are significant downsides to any other exemptions and registration forms companies might rely on. In consequence, companies currently are largely unable to issue stock in payment for services performed by gig workers.
The SEC has proposed to amend both Rule 701 and Form S-8 to permit companies to issue stock and equity awards to certain gig workers for five years, provided specified conditions are met.
Companies would only be allowed to rely on Rule 701 and Form S-8 to issue equity to gig workers who provide services (e.g., ride-sharing, food delivery, household repairs, dog-sitting, tech support). The use of Rule 701 or Form S-8 for equity issuances to gig workers who sell goods or rent property (e.g., vacation rentals) would still be prohibited.
To rely on Rule 701 or Form S-8 for issuances of stock to gig workers, the following conditions must be met:
The SEC would like companies that issue stock to gig workers to furnish the following information to the Commission at six-month intervals:
Comments on the proposal can be submitted to the SEC on or before February 9, 2021.
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