S-8 Filing

What Is an S-8 Filing?

An S-8 filing is an SEC filing required for companies wishing to issue equity to their employees.

The S-8 form outlines the details of an internal issuing of stock or options to employees similar to filing a prospectus. A company submits an S-8 filing for stock programs that are intended for the benefit of personnel that includes workers, directors, trustees, general partners, officers of the company, consultants and advisors.

Changes to better regulate S-8 filings were introduced to prevent abuses of the issuance of stock. The Securities and Exchange Commission (SEC) sought to stop instances where issuers and stock promoters manipulated S-8 filings to make illegal offerings of securities.

A common scheme would include an individual who was designated as a consultant to the company even though they never provided any consulting services. The individual might act to promote the stock for the purpose of boosting its market price. The individual would receive a large quantity of shares through an internal program registered through an S-8 filing and then immediately sell all the shares on the public market. The issuer of the stock would, in turn, receive the proceeds.

Rules Governing S-8 Filings

Registration requirements for S-8 filings were updated to ensure that consultants who receive stock in this way also provide bona fide services to the issuer. Those services must not be related to the sale of securities in a capital-raising transaction. The consultant’s services also cannot promote or maintain a market for the issuer’s securities.

The SEC introduced further changes to the registration requirements to restrict companies that have completed reverse mergers with shell companies from making S-8 filings. The requirements state that a registrant for an S-8 filing must not be a shell company nor been a shell company for at least 60 days prior to the filing. If the issuer had been a shell company at any time prior it must file documents with the SEC at least 60 before its S-8 filing to show that is not a shell company any more.

S-8 filings include additional prohibitions on who the equity shares may be distributed to. The securities cannot be disbursed to individuals or entities that actively promote or otherwise hype the stock through newsletters or other means.

Companies that submit S-8 filings must pay registration fees to the SEC based on the value of the stock and the total number of shares that will be issued in the plan. Shares and options offered through S-8 filings have dates that declare when they expire if they are not exercised.