Know what information you are obligated to share
Unfortunately, the SEC has few rules and best practices for handling secondary disclosure. At minimum, everyone covered in the tender offer should have access to two years of audited financials, unaudited financials for the last two quarters, a 409A valuation, the company charter, and the rules of the option program.
Companies should disclose the risks
As a supplement to the financials, executives should tell employees about the kind of threats and uncertainties the company may face. These include risks to the business or to the whole industry. There may never be another opportunity to sell; an important partner may go out of business and hurt the company’s prospects, or the company could simply run out of cash and go out of business because it was unable to raise additional funds.
Companies must field employee questions
Some companies hold town hall forums to explain the terms of the offer. Others have office hours or dedicated phone helplines that put employees in touch with neutral outside consultants. Everyone who’s thinking of selling should be encouraged to ask as many questions as they want — and to consult a lawyer or tax expert.
Management and boards should put themselves in the employee’s shoes
If you want to determine whether disclosures are sufficient, ask yourself if a particular piece of information would sway an employee to sell or hold. If the answer is yes, companies should disclose it.