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

Offering Stock Options to Employees in Kentucky

To offer stock options to employees in Kentucky, you must comply with the state’s securities laws. The relevant law is KYRS 271B.6-240 ^[1.1]. According to this law, a corporation may issue rights, options, or warrants for the purchase of shares of the corporation. The board of directors shall determine the terms upon which the rights, options, or warrants are issued, their form and content, and the terms and conditions upon which and the consideration for which the shares are to be issued. The board of directors may authorize one or more officers of the corporation to designate officers and employees of the corporation or of any of its subsidiaries to receive rights, options, or warrants to be issued by the corporation. Any resolution adopted pursuant to this subsection shall specify the total number of rights, options, or warrants the officer or officers may award. The board of directors shall not authorize an officer to designate himself or herself as a recipient of any rights, options, or warrants ^[1.1].

However, certain securities are exempt from the Kentucky securities laws. KRS 292.400 lists the types of securities that are exempt from KRS 292.340 to 292.390. Securities issued by corporations formed under KRS Chapter 279 are exempt ^[2.2]. Therefore, if the corporation issuing the stock options is formed under KRS Chapter 279, the securities laws may not apply.

In summary, to offer stock options to employees in Kentucky, a corporation must comply with KYRS 271B.6-240. However, if the corporation is formed under KRS Chapter 279, the securities laws may not apply.

Source(s):

• [1.1] Share options.
• [2.2] Exempt securities.

Jurisdiction

Kentucky

• General