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

To offer stock options to employees in Virginia, you must comply with the securities laws of the state. The relevant law is VACV 13.1-646, which allows a corporation to issue rights, options, or warrants for the purchase of shares or other securities of the corporation. The board of directors or a committee of the board of directors may authorize the issuance of such rights, options, or warrants and determine the terms and conditions upon which they are issued, including the consideration for which the shares or other securities are to be issued [1.1].

However, there are restrictions and conditions that may apply to the issuance of such securities. The terms and conditions of rights, options, or warrants may include restrictions or conditions that preclude or limit the exercise, transfer, or receipt thereof by designated persons or classes of persons or by any transferee or transferees of such persons or classes of persons. Any action or determination by the board of directors or a committee of the board of directors with respect to the issuance, the terms and conditions of, or the redemption of rights, options, or warrants shall be subject to the provisions of VACV 13.1-690 and shall be valid if taken or determined in compliance therewith [1.1].

Additionally, VACV 6.2-1019 states that stock option plans and stock purchase plans may be established only after the trust company has opened for business and shall be approved by the shareholders of the company in accordance with applicable provisions of the Virginia Stock Corporation Act (§ 13.1-601 et seq.) [2.1].

Furthermore, VACV 13.1-649 allows for restrictions on the transfer or registration of transfer of shares of the corporation, including shares issued pursuant to stock option plans. Such restrictions are valid and enforceable against the holder or a transferee of the holder if the restriction is authorized by this section and its existence is noted conspicuously on the front or back of the certificate or is contained in the information statement required by subsection B of § 13.1-648 [1.2].

Therefore, to offer stock options to employees in Virginia, you must comply with the provisions of VACV 13.1-646, VACV 6.2-1019, and VACV 13.1-649, as well as any other applicable securities laws. You should consult with a legal professional to ensure that you are in compliance with all relevant laws and regulations.

Source(s):
Jurisdiction

Virginia