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Can I offer stock options to employees without violating securities laws in Indiana? What are the requirements?

To offer stock options to employees without violating securities laws in Indiana, the following requirements must be met:

Requirements for Stock Issuance Plan

A stock issuance plan must be created and issued by the corporation’s board of directors, and the terms of the plan must be determined by the board of directors [2.1]. The plan must describe all significant terms of the proposed stock issuance, including any proposed stock order form and any agreement or other document defining or limiting the rights of stockholders [3.2]. The plan must also establish a pricing committee within the board of directors of the entity making the offering of stock, consisting exclusively of outside directors [4.3].

Prohibition of Stock Options as Compensation

An MIHC or an affiliate of an MIHC may not use any form of a stock option or other preference with respect to the sale or purchase of any stock or other equity instrument of the MIHC or an affiliate of the MIHC to compensate an officer or director of the MIHC or an affiliate of the MIHC for services in connection with a plan to issue stock [4.2][1.2].

Prohibition of Stock Purchase Options for Directors or Officers

A reorganized insurer or stock holding company may not grant stock purchase options to directors or officers, or both, until at least six (6) months after public trading for the stock has begun [1.1].

Stock Issuance Plan Discretionary Provisions

A stock issuance plan may provide for the establishment of an employee benefit plan that provides benefits that are subject to taxation under Section 83 of the Internal Revenue Code or that complies with the requirements of Section 422 of the Internal Revenue Code, for the purpose of granting stock or stock options [4.1].

Based on the above requirements, it is possible to offer stock options to employees without violating securities laws in Indiana, as long as the stock issuance plan is created and issued by the corporation’s board of directors, the terms of the plan are determined by the board of directors, and the plan does not violate the prohibition of stock options as compensation or the prohibition of stock purchase options for directors or officers. Additionally, the stock issuance plan may provide for the establishment of an employee benefit plan that provides benefits that are subject to taxation under Section 83 of the Internal Revenue Code or that complies with the requirements of Section 422 of the Internal Revenue Code, for the purpose of granting stock or stock options.

Source(s):
Jurisdiction

Indiana