The Japanese Financial Services Agency (FSA) recently concluded that a company’s offer of RSUs to its Japanese employees was a securities offering, notwithstanding the fact that the RSUs were granted by a foreign parent company (not the local employer) and the employees did not pay cash consideration to receive the RSUs or the underlying shares. The FSA required the company (a US multinational) to make securities disclosures in relation to its grant of RSUs.
This is a departure from the position previously taken by the FSA which indicated that awards and/or shares granted at no consideration would not be considered securities offerings for purposes of the Japanese securities filing requirements (unlike grants of options or the offering of an ESPP which are subject to the securities filing requirements in Japan, unless an exemption applies).
It should be noted that the FSA has not made a formal announcement that RSUs are considered securities offerings nor have they provided any guidance on when a grant of RSUs must be included in a securities disclosure.
Notwithstanding, based on the guidance provided by the FSA to the company described above, we believe it is prudent to assume that a grant of RSUs that is made “in parallel” with a grant of stock options or the offer of an ESPP will need to be disclosed in any securities filings that has to be completed for the options or ESPP. The FSA has not defined what would constitute “in parallel” but we believe it is reasonable to assume that a parallel offering does not occur where the grant of the RSUs is communicated more than two weeks before or after the grant of the options or the offer of the ESPP (as applicable).
As there is no official guidance from the FSA, this position is still subject to change. However, at this time, we are recommending companies take a conservative approach going forward and include RSUs in any securities filings made for options or an ESPP if the grants are communicated within two weeks of a grant of stock options or the offer of an ESPP. We will continue to provide updates as we obtain more information on this new development.