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

Based on the information provided in the Alabama Code, 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 consideration for which the shares are to be issued ^[2.1].

Therefore, to offer stock options to employees without violating securities laws in Alabama, a corporation must ensure that the terms and conditions of the options are determined by the board of directors and that the consideration for which the stock or other securities are to be issued is adequate.

It is also important to note that the director, while serving as such, shall not directly or indirectly be financially interested in or associated with any commercial bank, savings bank, trust company, industrial loan or investment company, credit union, building and loan association, or any other person subject to the jurisdiction of the commission or the director ^[3.3].

Additionally, a corporation may impose restrictions on the transfer or registration of transfer of stock of the corporation. A restriction does not affect stock issued before the restriction was adopted unless the holders of the stock are parties to the restriction agreement or voted in favor of the restriction. A restriction on the transfer or registration of transfer of stock is valid and enforceable against the corporation, the holder, or a transferee of the holder if the restriction is authorized by this section and as provided in Section 10A-1-3.42, and its existence is noted conspicuously on the front or back of the certificate or is contained in the information required by Section 10A-1-3.45 ^[1.2].

In summary, to offer stock options to employees without violating securities laws in Alabama, a corporation must ensure that the terms and conditions of the options are determined by the board of directors and that the consideration for which the stock or other securities are to be issued is adequate. The director must not be financially interested in or associated with any commercial bank, savings bank, trust company, industrial loan or investment company, credit union, building and loan association, or any other person subject to the jurisdiction of the commission or the director. The corporation may also impose restrictions on the transfer or registration of transfer of stock of the corporation.

Source(s):

• [2.1] Share options.
• [1.2] Restriction on transfer of stock.
• [3.3] Director - Qualifications; interest in banks, etc., prohibited; salary.

Jurisdiction

Alabama

• General