Rule 701 for employee equity
The exemption that lets a private company grant options: who qualifies, and the 12-month limits.
Options are securities too. A private company grants them under Rule 701, which exempts sales under a written compensatory plan to employees, directors, officers and consultants who are natural persons. In any 12 months the amount sold under it can't exceed the greatest of $1,000,000, 15% of total assets or 15% of the class outstanding, and above $10 million the company must give the recipients specified disclosure.
Where this lesson's rules come from
The sources behind this lesson's requirements, by kind. Anything marked as a convention is ours, not the rule-maker's.
- SEC
- 17 CFR §230.701(d)(2) (opens in a new tab)Rule 701: equity for employees, directors and consultants of a private companyFree to read
The full map is in US GAAP, and where these rules come from.
The words this page teaches
Each links to its glossary definition, which also names the authority behind it and the components that render it.