Employee Share Plans in Europe and the USA - Sorainen

Employee Share Plans in Europe and the USAUnited States of Americareliance on Rule 701 during any consecutive 12-month period may not exceedthe greater of (i) $1 million (ii) 15% of the issuer’s total assets or (iii) 15% of theclass of securities offered. 5 Additional disclosure requirements, discussedbelow, apply when $5 million of assets have been sold under the plan in a 12-month period.Offerings to employees may also be made without registration in reliance onRule 506 of Regulation D. Under Rule 506, an offering only to persons who are"accredited investors" is exempted under the Securities Act and no disclosure isrequired 6 .It is possible to combine reliance on these two exemptions, and, for example,rely on Rule 506 for offers and sales to employees who are accredited, and Rule701 for other employees, in order to avoid additional disclosure requirements,although state-level regulation may dictate which exemption is used at thefederal level.Securities sold in the United States pursuant to an exemption from registrationare “restricted” under U.S. securities laws and cannot be easily resold in theUnited States for 12 months.1.3 Disclosure:1.3.1 Federal: Under Rule 701, an employer must disclose a copy of thecompensatory benefit plan or contract to investors. In addition, if theaggregate sales price of the amount of securities sold during any 12month period exceeds $5 million, the employer must also disclosecertain additional information 7 . Further disclosure obligations under anti-567Calculations for (ii) and (iii) are measured at the issuer's most recent annual balance sheet date (if notolder than its last fiscal year end).In order to be "accredited", offerees must: be directors, executive officers or general partners of theissuer; have had incomes of $200,000 (or joint income with spouse of $300,000) for the two mostrecent years and a reasonable expectation of reaching that level again in the current year; or have netassets (with spouse) of $1 million. In addition, up to 35 non-accredited investors may be included in aRule 506 offering, but disclosure requirements apply when any non-accredited investors are involved.Nothing needs to be supplied to the SEC (although there is a Form D, it is not a condition of RegulationD that it be filed).These additional disclosures include the following: (i) if the plan is subject to ERISA, a copy of thesummary plan description; (ii) if the plan is not subject to ERISA, a summary of the material terms ofthe plan; (iii) information about risks associated with investment in securities sold pursuant to the plan;and (iv) financial statements required by Part F/S of Form 1-A under Regulation A. The financialstatements must be prepared in accordance with either U.S. generally accepted accounting principles(U.S. GAAP) or International Financial Reporting Standards (IFRS) as issued by the IASB. Thefinancial statements must be no more than 180 days old.UK/1729295/03 202 September 2010