Legal Question in Securities Law in New York

Whenever equity is involved things start getting messy and complicated. One reasons is that equity carries with it a property interest that is different than other forms of payment. In addition, the grant of equity may be governed by various SEC rules and/or exemptions and finally there are significant tax consequences for those receiving equity that if not considered properly could be very costly.

Depending on the type of stock that is granted the company and the "employees" would enter into a stock purchase agreement that might include a vesting schedule or an option grant agreement and a stock plan, an employment agreement, and possible a stockholders rights agreement. This in addition to an agreement securing the IP rights of the company.

The grant of equity has a lasting impact on the well being of a company so one should not take equity compensation lightly.

Roman R. Fichman, Esq.

"From Startup to Exit"

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