The SEC Experiments: Proposed Amendments to Include Certain Gig Workers in Compensatory Offerings under Rule 701 and Form S-8
December 3, 2020
Authored by: Katherine Ashton and Vicki Westerhaus
The SEC recently voted to approve proposed amendments to Rule 701 and Form S-8 governing the offer or sale of securities to employees through compensation programs. The proposed amendments provide for a temporary, five-year expansion of Rule 701 and Form S-8 to permit public and private companies to issue securities as compensation to certain “platform,” or “gig” workers, subject to various conditions.
Rule 701 provides an exemption from registration under the Securities Act of 1933, as amended, for the sale of securities by privately held companies to compensate employees, consultants, advisors and certain others under written compensatory benefit plans or written agreements. Form S-8 is used by SEC reporting companies to register the sale of public company securities to employees, consultants and advisors. Neither Rule 701 nor Form S-8 currently covers issuances to platform workers.
The proposed amendments to Rule 701 would allow a non-reporting company to offer and sell securities to “platform workers,” who are defined in the amended rules as workers who, pursuant to a written contract or agreement, provide services to an issuer or a third party through the issuer’s “internet-based marketplace platform or through another widespread, technology-based marketplace platform or system.” The proposed amendments to Form S-8 would permit a reporting issuer to include that same category of workers in compensatory offerings registered on Form S-8. The proposed amendments also include conditions that are designed to limit the possibility that the amended rules could result in offers and sales of securities for capital-raising, rather than