Improved Public Exercising Experience

Option exercising with Public companies is now easier than ever. 

The exercising experience for public companies has been improved. The exercise request is now a coherent workflow guiding users through each step and providing key information about the exercise. With this detail, users can be more confident with their selection at each step of the exercise request. If there are issues with the exercise, clearer banners explain how Carta calculates share amounts and market prices.


Who this affects: 🇺🇸 Public US companies

What's new:

  • New experience for exercise requests:

    • Added explanations of exercise transaction methods
    • Clearer confirmation of address and payout method
    • Improved order details with indicators on maximum eligible options and clear explanation of order types
    • Incorporated review of taxes withheld and reminder of potential for additional taxes owed at end of the year
    • Summarized the exercise request clearly laying out the cost and transaction details so users understand what will be needed 
  • Cashless exercising reflects issuer imposed trade limits

Action required: No action required

Timing: Released to 100% of all public companies on Jan 24, 2022

Pre-filled W-9s in LP Closings Tool

What's New

LPs subscribing to Funds and SPVs using Carta's Closings Tool can now E-Sign a pre-filled W-9 while filling out subscription documents. 

Having LPs submit a tax form is an important part of the closings process for any Fund or SPV to ensure tax teams correctly prepare LP K-1s. We received feedback from LPs about the friction of printing, signing, and uploading W-9s and wanted to streamline the process.

How it Works

For Individuals

For U.S. based LPs subscribing as an Individual, we can now optionally pre-fill a W-9 for them to review and E-sign in just three clicks. The W-9 is pre-filled based on the information the LP already provided as part of their subscription. 

For Partnerships and LLCs

For LPs subscribing as a partnership or through a LLC we'll ask some additional questions to ensure we are accurately representing the LPs federal tax classification on the W9.

With the initial release of this product we will not be pre-filling W-8s or W-8BEN-Es for non-US LPs but will still allow them to upload their own form.

Who this affects

This is now available to any LPs using Carta's Closings Tool. The Closings Tool gives LPs a quick and easy way to fill out Fund and SPV subscription documents. 

Funds Can Now Review and Request SOI Updates in-App

What’s new?

Valuation updates can now be submitted directly in Carta!

We kicked off EoY reporting by launching Schedule of Investments (SOI) review emails with in-app flows for Fund Managers approve their valuations, markup their investments, or request other updates right in Carta. This is the first step in a set of functionality for making the quarterly and annual reporting process easier than ever.


How it works:

Rather than Fund Admins having to comb through investment valuations for every entity and curate one-off email threads with Fund Managers to ask for reviews and updates, they can now kickoff these emails with just a few clicks in Carta, and easily track where each entity is in the reporting process.

Fund Managers will be sent a link to their SOI for review and approval, where they can approve on the spot or request changes directly in app. For markups or markdowns, they can go through a fully in-app flow to complete the updates. They no longer need to go download their SOIs and itemize every change through email, to send back to their Fund Admin.

Any approvals or requests for changes will automatically be queued for Fund Admins to review and push through, while markups and markdowns that pass health checks will push through updates directly and be routed to Carta's Deal Docs team, so they can review and catalogue supporting documentation.


Who does this impact?

Fund Admins now have quicker, more efficient ways to send out SOIs to kickoff financial reporting, and track where each of their entities are in the process. They can spend less time keeping track of multiple email threads and keeping mental lists of which assets are ready to go and which need to updated.

Fund Managers can also view their SOIs by fund and directly request changes at any time, within Carta as needed, ensuring asset valuations are up to date throughout the year.


What’s next?

The team is working to add more in-app methods for funds to easily to keep their investment valuations up to date, such as note conversions, further reducing the time delays from back and forth emails, and ensuring better expediency and accuracy for valuation updates. 

1099B Cost Basis Report available to Company Admins

What’s new?

We are releasing a report to all Private Market companies for administrators to review their certificate cost basis and original acquisition dates. This report will allow administrators to view cost basis data prior to the delivery of 1099B tax statements to stakeholders by mid-February.

How it works

This in-app report is available by navigating from Capitalization -> Reporting -> Form 1099b cost basis report.

Administrators will be able to view columns like stakeholder details, certificate ID's, quantity of shares sold, date acquired (original acquisition date), proceeds, gain/loss, and including various cost basis fields: 

  • cost_basis_total_certificate = full value going back to the original certificate
  • cost_basis_per_share = cost basis of total certificate / total shares quantity
  • cost_basis_sold_certificate = cost basis per share X sold shares quantity

From this report, Issuers can identify which certificates need to be changed and/or excluded from tax filing, and will have the opportunity to correct the data until late-January.

Who does this impact?

This report will be available to individuals with role permissions of Company Admin, and including Company Editors.

What’s next?

In the next month, Carta's Liquidity team will be reaching out to ensure that data has been reviewed and is considered approved by Issuers for generating 1099B statements. Stakeholders will be able to access tax statements in their portfolios by mid-February.

New "Firm Management" page

What’s new?
Today, we are rolling out a new homepage for Carta Fund Admin GPs. The new Firm Management page is the first step in a series of new features we’ll be implementing to simplify the GP experience on the platform.

How it works
Instead of landing on the Firm Overview page when logging in, GPs will now see the new Firm Management page. From this page GPs can easily:
  • See an overview of all their entities’ high-level metrics 
  • Search & navigate to any of their entities
  • Access fund detail pages like Fund Performance, Partners, and Investments
  • Filter and sort their entities
Who does this impact?
The new homepage will be available to all Carta Fund Admin GPs. This has no impact on the LP experience, LP Portal-only experience, or free-firm experience. 

What’s next?
Over the next few weeks, the team will be working on adding more functionality and features to the page. Stay tuned for more details

Returning LP Experience in Closings

What's New

We simplified the experience for returning LPs filling out subscription documents in Carta’s Closings Tool. With most of their information pre-filled, LPs can fill any remaining info & sign subscription documents with just a few clicks. 

How it Works

When returning LPs are prompted to fill out subscription documents, we will pre-fill their documents if they’re investing with the same entity or individual they’ve previously filled out subscription documents for. This is especially useful for LPs that have investments on Carta both as an individual and through multiple entities like trusts or LLCs.

This is a big win for fund managers that are launching multiple funds or SPVs with the same LP base that are looking for a streamlined experience for their LPs. 

Who this affects

This is now available to any LPs using Carta's Closings Tool. The Closings Tool gives LPs a quick and easy way to fill out Fund and SPV subscription documents. 

409A valuation data shared with Investors

What's new?

Portfolio companies can now share financial and cap table information with their Investors when their 409A valuation is complete. If you've been shared this data, you can view and download it directly from your Carta account.

How does it work?

When your portfolio company accepts their Carta 409A valuation, we ask them if they want to share some of the data used in the valuation with their Investors to help their investors stay up to date on the company's financial situation and to help streamline some of the jobs needed to be done on the Investors side, such as the ASC 820 valuation. 

The portfolio company will select which Investors to share the data with: 

If you were one of those Investors that was shared the 409A data, you will then receive an email notifying you of the new document that has been shared and will be able to see it in your Documents tab under that portfolio company in Carta!

What information will be shared?

Historical financials

Information about the company's last twelve month revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) as well as the previous twelve months revenue and EBITDA. Since the 409A valuation is a valuation of the company at a point in time, the data used is as of a specific date. For example, Meetly conducted their 409A valuation as of 03/01/2019 (this is their valuation date). For the historical financials, the company provided the last twelve months (03/01/2018-2/28/2019) and the previous last twelve months (03/01/2017-02/28/2018).

Summary financial forecast

In addition to their historical financials, the company will also share the projected next twelve month's revenue and EBITDA. Using the same example above, this would mean Meetly has shared 03/01/2019-02/29/2020 financial projections for revenue and EBITDA.

Cash and Debt

The company will also share the cash and debt balances as of their valuation date. In the example above, this would mean Meetly has shared their cash and debt balances as of 03/01/2019.

Summary level ownership information

Some cap table information will also be made available, which includes access to share class level information but will not contain any information about share holders. Here's what you'll see as an investor: 

Industry sector

Information about what industry the company operates in will also be shared. This is the industry information that was used to conduct the 409A valuation and may represent the current industry the company operates in. At Carta, we have preset industry lists that are used the 409A valuation. Should "N/A" appear next to industry sector for your shared data, it means the 409A valuation used a custom industry set and this information will not be made available.

 Time to exit

This represents the number of years until the company expects to have an exit event. 409A valuations are capped at 5 years for the time to exit so keep this in mind when reviewing this estimated exit term.

What information will NOT be shared with me?

This document will not contain any information about the concluded FMV, latest preferred price, any rights & preferences the preferred share holders have, strike prices or purchase prices, and any information about a specific shareholder.

Is this available to me?

The feature is available to any investor that has been shared the 409A valuation data. If you aren't seeing a document in your account, it may be that your portfolio companies either have not received a new 409A valuation since the feature has been released or have not shared the data with you yet. 

LP Status Tracker in Closings

What's New

We launched a new LP tracker in our Closings Tool so fund managers can easily track the status of each LP filling out subscription documents. We clearly show exactly where the LP is in the process and provide instructions for what each LP needs to do to progress and finish their subscription.

How it Works

In the Closings Tab of the entity you’re fundraising for, you’ll see one these six statuses assigned to each LP: 

  • Prospect: LP has been added but the fund manager has not invited them to fill out documents yet. 
  • Invited: LP has been invited to Carta but has not started filling out their documents.
  • In progress: Investor has started to complete documents.
  • Investor Signature Pending: Investor has completed documents and requires two or more signatories. Not all signatories have signed yet.
  • Submitted: Investor documents are ready for review.
  • Countersigned: Documents are complete and the investor has been admitted to the fund.

To get more detail about the specific LP, you can click on each status and get more detailed information about the LPs status such as: 

  • If they are using the help of someone else such as a wealth manager to fill out documents
  • Who still needs to sign if there were multiple signatories designated by the LP
  • What actions does the LP need to take to complete their subscription
  • Timeline of the LPs interactions with the closings process

Additionally from this modal you can manage LP access to your fundraising data room and see who has been interacting with the information in each data room. 




Additional Resources

Check out that walks through the step-by-step process of adding LPs to the closings tool. 

Is this available to me? 

This is now available to any fund managers using Carta's Closings Tool. The Closings Tool gives LPs a quick and easy way to fill out Fund and SPV subscription documents.

Adjust taxes for option exercises

What’s new

Companies can now adjust taxes for option exercises previously approved in Carta.

Legal administrators can navigate to the Exercises ledger (Transactions > Exercises) and select "Adjust taxes" within a ledger row dropdown to find the new tool:


How it works

The "Adjust taxes" tool will not be available for option exercises in the "Requested" status since option exercise approvers can adjust taxes as part of the exercise approval workflow.

For ACH option exercises already approved by the company or for company-entered manual exercises, the "Adjust taxes" tool will be available for use.

After a legal administrator selects "Adjust taxes" from the Exercises ledger, they'll see the following modal:

The legal administrator will be asked to provide a reason for the adjustment. Next, the following actions are available:

  • Un-check a box next to a tax type to remove it from the option exercise
  • Re-check a box to re-add a previously removed tax type to the option exercise
  • Update the specific tax withholding amount in the "Adjusted" column
  • Select "Add another tax type" to add a new tax type to the option exercise

Note that new tax types can't be added from this modal. If you'd like to add a new tax type to the exercise, add it first in the Tax rules page (Compliance > Tax rules) and then come back to the "Adjust taxes" tool to add it to the option exercise.

Once the adjustment has been saved, both the company and the stakeholder will see a blue banner when viewing the option grant. The banner contains information about the newly adjusted tax amount and exercise cost in addition to when the adjustment was entered in Carta:

Adjusted tax amounts will also be reflected in the "Exercised and settled report" and the "Tax withholding report" (Capitalization > Reporting).

For more information, check out the support article for the new "Adjust taxes" tool: https://support.carta.com/s/article/adjust-taxes-option-exercises

Who this affects

Private and public companies that issue option grants.

Timing

Available to all companies now.

Qualified Small Business Stock (QSBS)

What’s new

Companies using Carta for 409A will now be additionally assessed for qualified small business eligibility at no extra cost to the company.

Certificates issued by a qualified small business as determined by Carta will have a "QSBS" tag in the product to indicate that the shares represent Qualified Small Business Stock (QSBS). The goal of these tags is help stakeholders make more informed selling decisions.

The IRC’s definition of a qualified small business is restrictive yet vague and open for interpretation at the edges, so potential holders of QSBS should consult their tax advisor before making decisions to sell and claiming the QSBS tax benefit.

How it works

Based on company-provided information during the valuations process, Carta will assess the following criteria for qualified small business eligibility:

  • Company's gross assets are $50M USD or less
  • Company is an active business
  • Company is a C-corp
  • Company does not operate in excluded industries

If a company is identified as a qualified small business, a new badge will appear in the 409A dashboard:

If a stakeholder receives a certificate from a qualified small business but hasn't yet met the 5 year holding period for QSBS, they'll see a "QSBS eligible" tag in their portfolio:

Drilling into the security, the stakeholder will see some additional information about the QSBS status of the certificate:

Stakeholders who have held shares issued by a qualified small business for 5 years will see a "QSBS" tag in their portfolio instead:

Additional Resources

For detailed information about QSBS in Carta, please refer to our QSBS support article.

Who this affects

Companies using Carta for 409A and their stakeholders.

Timing

  • Available now to 50 randomly selected 409A customers
  • General availability for all 409A customers coming in two weeks
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