Purpose of Form S-8
1. To Offer Incentives to Employees in the Form of Securities: When businesses offer stock as a component of profit-sharing, incentive schemes, bonuses, options, or other such possibilities, they must utilize Form S-8. Any individual who works for the company as an employee, general partner, director, consultant, trustee, or adviser is considered an employee by the SEC.
2. Information to Investors: Under specific conditions, such as an employee benefit plan, businesses are permitted to offer shares to their workers using the SEC Form S-8, a short-form registration statement. The SEC has mandated this in order to provide investors with the knowledge they need to make an informed decision when buying a new investment.
3. Improves Transparency: The SEC has mandated such regular filings so that this can help to curtail other forms of dishonesty, such as fraudulent conduct and substantial misrepresentations.
4. Cover Related Party Transactions: In addition, SEC has also included former workers, their families, and insurance agents acting solely in a commercial capacity for the company. Security party transactions with employees and families are often highlighted as red flags as they are highly prone to fraud or collusion.
5. Detailed Paperwork for Security Offerings: Before a company offers these securities, the paperwork needs to be submitted. Sometimes, the SEC may accept less detailed paperwork from businesses with more straightforward organizational structures or from smaller, more focused securities offerings. Certain offers, such as small or private issues, interstate offerings, and securities issued by local, state, or federal governments, are exempt from the SEC’s registration requirements.