JOBS Act Excludes Shares from Compensation Plans from Shareholder Limits

The JOBS Act raised the threshold from 500 to 2,000 on the number of shareholders a closely held company can have before the company becomes treated as a de facto public company. One of the less publicized provisions of the act excludes shares employees receive pursuant to an employee compensation plan from this limit. Ownership from qualified employee benefit plans, such as ESOPs, was already excluded, but this new provision would also apparently exempt, most notably, shares from stock options and employee stock purchase plans. These securities already do not count until they are exercised, but the new law presumably includes them after they are exercised as well. The SEC will have to draft specific regulations.