Carta now helps private company administrators coordinate the settlement of Restricted Stock Units (RSUs). The end-to-end offering allows an Issuer to:
- configure and schedule a RSU Settlement;
- provide RSU holders with an election period to identify how they want to pay the tax withholding obligation associated with the upcoming settlement;
- collect any cash payments from RSU holders; and
- automatically update the cap table at settlement.
During the election period, RSU holders are invited to access a workflow to view their vested RSUs along with the tax withholding amounts due at settlement. They have the flexibility to meet their tax obligation by electing to net-settle, pay the full amount in cash, or use a combination of surrendered shares and cash.
This offering helps facilitate the RSU settlement process from setup to share delivery for private Issuers that award RSUs under their equity compensation plans.
How does it work?
Private company administrators can go through a four-step process to configure an upcoming RSU Settlement with Carta Liquidity. Issuers can:
- set the parameters of the settlement (e.g., FMV, election timing, settlement date);
- view and confirm the RSUs that will be included based on the vesting end date (i.e., record date); and
- view and confirm tax withholding amounts associated with the settlement.
Issuers can set rates to use when calculating tax withholdings owed based on each RSU holder’s tax jurisdiction(s). Carta Liquidity’s integration with Carta’s equity management platform and tax engine eliminates the need for the administrator to pull and sort cap table information manually or calculate tax withholdings for each RSU holder. Alternatively, Issuer’s can provide tax withholding amounts calculated by their HRIS provider for use in the settlement.
When the administrators invite RSU holders to submit their elections, RSU holders will be able to view which of their RSUs will be settled and the tax withholding amount due per security. In addition, individuals will identify how they would like to satisfy the tax withholding amount owed through a self-service election workflow.
The three tax withholding payment options include:
- Share withholding (i.e., net settlement) - The entire tax withholding amount is paid by surrendering a portion of shares from the vested RSUs released for settlement. The net amount of shares after withholding will be delivered to a RSU holder at settlement. This is the default option.
- Cash payment - The entire tax withholding amount is paid by a RSU holder in cash (only USD is accepted). RSU holders are required to fund their brokerage account in order to make this election.
- Share and cash payment - Each RSU holder identifies the mix of cash and shares that will be used to pay the taxes due at settlement, providing them more flexibility. RSU holders are required to fund their brokerage account in order to make this election.
For any cash elections, RSU holders are instructed to transfer the necessary cash to their Carta Liquidity brokerage account*. RSU holders are able to modify their election until the end of the election period.
At settlement, Carta Liquidity’s integration with Carta’s equity management platform automatically updates an Issuer’s cap table to reflect the shares of stock delivered to RSU holders, and any cash payments received to cover applicable tax obligations will be transferred automatically to the Issuer’s brokerage account. RSU holders will then receive their resulting equity from the Issuer in their Carta accounts. In addition, Carta Liquidity will provide a record of the RSU settlement to both the Issuer and RSU holders.
Run regular RSU settlement processes with automatic cap table updates and tax withholding calculations, saving your team time and resources
The RSU Settlement offering will:
- Reduce the manual administrative work required to set up a regular cadence of RSU settlement through equity management and tax engine integrations
- Provide RSU holders flexibility to choose how they would like to meet their tax withholding obligations through a self-service election workflow
- Provide optionality to RSU holders to pay out of pocket for the amount they feel comfortable paying.
Start managing RSU Settlements on Carta!
Reach out to firstname.lastname@example.org to speak with your relationship manager to turn on this feature.
*Note: Brokerage accounts and other brokerage services are offered through Carta Capital Markets, LLC (Member: FINRA/SIPC)