The Advisors' Blog

I blogged a couple of times last week on TheCorporateCounsel.net about the SEC’s proposed Reg E-Delivery and its potential impact on proxy delivery expenses. This Cooley memo points out that, if approved, the rules will also affect delivery obligations that come into play with compensation plans – likely by establishing new, uniform standards for electronic delivery of securities disclosures and reports – including the 10(a) prospectus under Form S-8.

As Meredith noted in this blog, the proposed rules may significantly ease the burden on issuers to provide paper copies to former employees and other participants in employee benefit plans who do not have access to company email.

While we wait for final rules, the Cooley memo explains the ongoing importance of complying with current requirements. The SEC has already provided employer-employee e-delivery relief – but taking advantage of that relief requires attention to the details. The memo recaps how the e-delivery method currently works for employers making grants under equity incentive plans in reliance on an S-8 registration statement, based on SEC releases issued in 1995 and 1996. Here’s an excerpt:

– Presumed consent; access. As noted above, an employer generally may presume consent to e-delivery by employees who are regular email users or, for those who are not regular email users, are able to receive e-delivery via other means, such as through administrative assistants or co-workers. However, the email must prominently state that a paper copy is available upon request, and the employer must in fact make paper copies available to any employee who asks.

– Former employees. Because of an expectation that former employees and service providers no longer have routine workplace access, former employees and service providers must provide informed consent to e-delivery.

– Form of delivery. The applicable materials can be attached to the e-delivery vehicle (for instance as attachments to an email) or, where documents are not directly attached , the e-delivery must provide employees and service providers with the information necessary to easily locate and retrieve them (g., directions for accessing them through the company’s local area network or a third-party provider’s equity program portal). The access medium must “not be so burdensome that intended recipients cannot effectively access the information provided,” and recipients must have the opportunity to retain the documents or have ongoing access equivalent to personal retention.

The memo also points out that employer-employee relief is not limited to S-8 circumstances – it can prove very useful in other employee compensation circumstances as well, such as issuer tender offers.

– Liz Dunshee