Sometime around 8-10 years ago, requiring company approval for secondary sales started becoming a popular restriction to put into ISO grants (prior to that, it was just right of first refusal on sales). It's largely unfavorable to employees, but it does prevent some pretty bad situations. The benefits of this restriction were explained to me as two major things:
1) By preventing secondary sales, the company can control the going price for the stock. This means when the company has an independent third party do a 409a valuation, they don't have to take into account high third party sales, which would push the 409a up. Not inflating the 409a is beneficial to employees that want to leave the company and exercise stock. It means their AMT tax hits won't be as bad.
2) It also means the company/board get to control who are investors in the company, and thus who has the ability to request to relevant internal company information (like financials).
Both of these points increase the power of the insiders over the power of all shareholders. It's very anti capitalistic, and I stand by calling these rules dirty.
Company is not supposed to control its share price. Company is supposed to be subjected to its shareholders.
1) By preventing secondary sales, the company can control the going price for the stock. This means when the company has an independent third party do a 409a valuation, they don't have to take into account high third party sales, which would push the 409a up. Not inflating the 409a is beneficial to employees that want to leave the company and exercise stock. It means their AMT tax hits won't be as bad.
2) It also means the company/board get to control who are investors in the company, and thus who has the ability to request to relevant internal company information (like financials).