RSU Settlement for Private Companies

What's new?

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?

Issuers

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.


RSU holders

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 company_coverage@cartacapitalmarkets.com 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)


Notify Users of Insufficient Funds

What’s New

When a user’s bank account does not have sufficient funds to pay for the exercise via ACH, Carta will warn the user when reviewing the exercise. The user will have the option to change the selected bank account, lower the amount of options to exercise, or proceed with the exercise.

Additional improvements to the review exercise page better highlight key details of the exercise, reducing the need for scrolling. The UI also now explicitly states that the total represents a cost to the user.


Users choosing to proceed are then given a final message that an underfunded exercise may be canceled.

Who this affects

This feature is available to employees who have set up their ACH bank account on Carta through Plaid. 

How it works

Carta is using Plaid Balance to confirm the available balance of the associated bank account prior to submitting the exercise request. No account balance information is stored on Carta. This feature does not block users from submitting exercise requests, rather warns them about the potential risk of a canceled exercise.

What happens if the selected bank account doesn’t have enough money for the exercise? 
We now warn users that their account doesn’t seem to have enough money to cover the exercise cost. We allow them to proceed anyway, as they could potentially add funds to the account before Carta attempts to pull the funds. If it turns out there are insufficient funds, we will cancel the exercise.

How does Carta know how much money is in my bank account?
By connecting a bank account through Plaid, we can use Plaid’s APIs to retrieve real-time balance information at the time of the exercise request. Checking the accounts available balance represents the predicted balance net of any pending transactions. This type of information is often used to protect against overdrafts and non-sufficient funds fees. For more information on Plaid Balance, see here.

What if I manually connected my bank account?
Users can always connect their bank accounts manually instead of using Plaid. For these users we cannot know their available balance and they will not receive any warnings about insufficient funds.

Timing

  • 12/21/2022 - Released to 25% of users, with general availability by the end of January

How do I learn more or get help?

Visit Carta Support for more details on Exercising Using ACH and Setting Up Your Bank Account

Limited Partner Mobile Experience

What's new?

LPs can now manage their investments, all from their mobile device.

What’s important or valuable about this change?

Access your investments, now on the go.

LPs can manage their fund investments and personal investments from anywhere, at any time.

What do I need to do?

Download the Carta mobile application, suited for iOS and Android devices, from your app store. Then login using the same information used to login to your LP Portal on the web application. Once on the home screen, select the fund investment or personal investment you’d like to view: 

If a fund investment is selected, you’ll be able to view key investment details like called capital and net asset value. Plus, you can view, download, and send all fund investment documents like partner capital account statements (PCAPs) and  K-1s. 

If a personal investment is selected, you’ll be able to view key ownership information like share amount and issue date. 

For fund investments, once on Investment Details, scroll to access your fund documents. Select View all  to view, search, and filter all fund documents. Use the search bar at the top to search by document name. Or select Filter to filter by document type like PCAPs, capital calls, or tax. 

Once your document is selected, select the export button to markup, send, or download.


How do I learn more or get help?

Have additional questions about Carta’s LP mobile experience? Reach out to your account manager or request a demo today. 


Off-Platform Payment Settlement (Capital Markets)

What's new?

Carta Liquidity now offers more optionality when paying transaction proceeds following a tender offer or other private secondary transaction. Issuers can now elect to have proceeds for one or more sellers be paid outside of the Carta Liquidity platform via a third-party (including the Issuer). Below are several use cases that Carta now supports:

  • Proceeds paid through an Issuer’s payroll;
  • Proceeds paid to a seller’s trust account for distribution to beneficiaries; or 
  • Use of a third-party paying agent to distribute proceeds.

How does it work?

During the setup phase of a transaction, an Issuer can elect to have the transaction proceeds for one or more sellers paid off-platform. The Issuer will inform Carta which participants should receive their proceeds off-platform, and the transaction’s Offer to Purchase (OTP) will describe the method by which participants will receive their net sale proceeds. 

At settlement, Carta will deposit proceeds for participants not selected for off-platform payment into their Carta brokerage accounts. For a company repurchase (share buyback), no further action is taken by Carta for the balance of the proceeds as the Issuer will be responsible for the distribution through payroll or otherwise. In the case of a third-party tender offer, Carta will send the balance of the proceeds to the Issuer to handle the distribution to the remaining sellers.

At the close of the transaction, the total amount of money distributed by Carta or a third-party will be recorded in the Transaction Summary Report for the Issuer and the Trade Confirmation for each seller.

(a) Issuer Transaction Summary Report

(b) Trade Confirmation

(c) Statement Cycle Report

Distribute tender offer sale proceeds off-platform through payroll or other means for more payment flexibility

The off-platform payment settlement feature will:

  • Increase an Issuer’s flexibility in determining how transaction proceeds will be paid to sellers for secondary transactions; 
  • Reduce tax withholding and reporting complexity when Issuers choose to leverage their payroll system to distribute proceeds and withhold taxes; and
  • Make it easier for employee sellers that receive proceeds through payroll to contribute those additional funds to their 401k’s or other automated savings plans.

Reach out to Carta to get the process started

Do you want to run a tender offer or other private secondary transaction with a fully-integrated cap table experience? Reach out to Carta Liquidity’s Corporate Coverage team at company_coverage@cartacapitalmarkets.com to figure out the best path towards liquidity. 

Note: 
1. Brokerage accounts and other brokerage services are offered through Carta Capital Markets, LLC. Carta Capital Markets, LLC is a member of FINRA/SIPC.

Tax Withholding Estimates during Order Entry (Capital Markets)

What's new?

Sellers participating in a private market secondary transaction, such as a tender offer, on the CartaX ATS can now view their estimated tax withholdings* during the Order Entry phase. Equipped with estimated tax information, sellers who are US-based employees will be able to make a more informed decision when determining sell preferences and better anticipate their net proceeds.

How does it work?

Issuers sponsoring a tender offer or another structured transaction will provide Carta with their employees’ city, state, and/or federal jurisdictional tax rates. Carta will use the applicable tax rates to calculate their individual estimated tax withholding. 

As sellers select which of their eligible stock holdings to sell during the Order Entry period, the Proceeds Calculator on the right hand side of the screen will automatically update and calculate what their estimated net proceeds may be after fees and taxes*. 

Sellers can then click on “View tax details” (hyperlink within the red box above) to view a breakdown of the estimated tax withholdings by security type and tax jurisdiction.

Enable your employees to understand their estimated tax obligations earlier in a tender offer when placing their sell orders.

The Tax Withholding Estimates during Order Entry will: 

  • Enable sellers to see how their security elections during the Order Entry period may impact their estimated tax withholdings, and ultimately, expected net proceeds; and
  • Save Issuers time by helping to reduce the amount of questions received from sellers about their potential tax withholding obligations. 

 Reach out to Carta to get the process started

Do you want to run a tender offer or other private secondary transaction with a fully-integrated cap table experience? Reach out to Carta Liquidity’s Corporate Coverage team at company_coverage@cartacapitalmarkets.com to figure out the best path towards liquidity. 


*Note - The estimated tax withholdings is for illustrative purposes only. The withholding amount shown is only an estimate. The actual amount withheld from a seller’s proceeds may differ significantly from the amount shown. Tax withholding is not a final calculation of taxes due. A seller may have a greater or lesser tax obligation than the amount withheld by the Issuer, and the seller is responsible for determining whether and when any additional tax payments are required. 

Disclaimer: Carta, through its wholly owned broker-dealer subsidiary, Carta Capital Markets, LLC, offers a streamlined experience for executing pre-negotiated stock transfers, tender offers, and other secondary liquidity transactions. Carta Capital Markets, LLC is a member of FINRA/SIPC.

Issuer Transaction Dashboard (Capital Markets)

What's new?

Issuers running a secondary transaction, such as a tender offer, through Carta Liquidity on the CartaX ATS can now access on demand real-time seller participation data during a live transaction via the Issuer Transaction Dashboard (“Dashboard”). 

How does it work?

Issuers can access their brokerage account online and click on their live transaction, where they will see their Dashboard. The “Participation overview” tab includes three key sections:

  • Participation breakdown: The pie chart provides a summary of the transaction’s subscription rate by Relationship type. Issuers can quickly see how close the transaction is to being fully subscribed. Relationship type is determined during the transaction’s setup period.
  • Participant engagement: The bar chart details the number of sellers who (a) have been invited to the transaction, (b) viewed the transaction, and (c) decided to participate by tendering shares.
  • Relationship summary: The table summarizes the participation level across all Relationship types. Details include the participation rate, shares tendered, and the notional value of tendered shares.

The table and charts on this page will update in real-time during the live transaction. 

The “Transaction overview” tab of the Dashboard will be accessible at the close of the offering period and provides a summary of the transaction, including a breakdown of deposits made into the Issuer’s brokerage account. Issuers will be able to access and download their Trade Confirmation and Transaction Summary reports here as well.  

 

Save time and gain real-time transaction and participation data on demand with the Issuer Transaction Dashboard

The Issuer Transaction Dashboard will: 

  • Give you real-time transaction and participation data on demand during a live transaction;
  • Provide you with full oversight and enhance your foresight over the transaction’s results related to filling a buy order; and 
  • Make it easier for you to provide your team with updates on a transaction and Relationship type level, preserving the confidentiality of individual seller activity.

Reach out to Carta to get the process started

Do you want to run a tender offer or other private secondary transaction with a fully-integrated cap table experience? Reach out to Carta Liquidity’s Corporate Coverage team at company_coverage@cartacapitalmarkets.com to figure out the best path towards liquidity. 

 

Disclaimer: Carta, through its wholly owned broker-dealer subsidiary, Carta Capital Markets, LLC, offers a streamlined experience for executing pre-negotiated stock transfers, tender offers, and other secondary liquidity transactions. Carta Capital Markets, LLC is a member of FINRA/SIPC.

Redesigned 409A Acceptance Flow


What’s new?

We have redesigned the way you review and accept your 409A valuation on Carta. This new design presents you first with a quick summary of the analysis along with a note from your analyst letting you know the next steps in finalizing your fair market value (FMV). Once you have reviewed the report, if you have any questions you can contact our team of valuation experts through the support module in the valuation review portal. Lastly, receive board approval from within or outside of Carta to finalize the current FMV on your account. 

How it Works

Once you receive an email notifying you that your valuation is ready for review, you can follow the link within that email to access the 409A ledger where you are able to review and download your valuation. Alternatively, you can navigate to the page within Carta at Compliance > 409A Valuation.




Review your valuation

From the 409A Ledger, once you select ‘Review 409A report’ you will be directed to the valuation review portal. Here you will find an overview of the analysis performed and the concluded FMV along with a note from your valuation analyst informing you of next steps and noting any details within the report that warrant extra attention. Once you have reviewed the analyst’s note and valuation summary, you can download the full report or access the support module from the valuation review portal to access support articles or get in touch with our team of valuation experts. 


Get board approval

Now that you have reviewed the valuation, the next step is to send it to your board for review. You can do so using the board consent feature within your Carta account to easily track acceptance from each board member within the Carta platform. Once all board members have submitted their board approval through the platform, your valuation will automatically be accepted on Carta. If you got approval outside of Carta, that’s great too, simply select ‘My board has approved’ to accept the valuation to finalize the current FMV in your account. Once finalized, the new FMV will be visible to your option holders on Carta.




409A Ledger Redesign

What’s new?

We have redesigned the 409A Ledger Page where you come to request and review the 409A Valuations of your company and enter the Fair Market Value (FMV) of your company’s options. The goal of this refresh is to help you navigate the valuation process with ease and access resources quickly whenever you need assistance. 

With this updated design you will quickly and easily identify where you are in the valuation process and what to expect next. Carta is here to help you along the way with curated support articles and a variety of options to get in touch with us if you have questions not covered within the articles.

How it Works

Under Compliance > 409A you will find a number of new features designed to help you navigate the Carta Valuation process with confidence.

Valuation Status Tracker

The Valuation Status Tracker at the top of the page clearly indicates where your company is in the valuation request process. Whether you are in the middle of completing your request, if your draft is ready for review or if you are anywhere in between, the tracker will let you know what your next step is as soon as you land on the 409A Ledger page. Also included are tools and support articles to help answer common questions that you may have based on where you are in the valuation process.



Review and accept your valuation

Once you have received your valuation, you can download it for review directly from the Valuation Tracker on the 409A Ledger page. After you have had a chance to review the report and are ready to accept, you will be directed to the final step in The Valuation Tracker, the acceptance workflow. 



Get in touch with our team

Have a question? Navigate to our Support Module on the page and select the contact method that works best for you, our team of experts will follow up with a response typically within 1 business day.



Viewing your 409A Valuations

Now that you have completed the valuation process, your most recent valuation will be displayed at the top of the table at the bottom of the page along with any previous valuations saved to your Carta account. If you have any questions for our Valuation team in between valuations, simply navigate to the new 409A Ledger Page to access our Support model to get in touch with our team of Valuation Experts.




Capital Calls on Android

General partners now have the ability to view and track capital calls from the Carta Android app. Investment firms can now track the progress of on-going and completed calls along with investor details, on the go, straight from the Carta mobile app.

Who this affects

  • Fund administration clients

Supported platforms

  • Android (Previously available on iOS)

What's new

Fund Administration clients can now access their capital call details and investor information from the Carta Android app.

  • The home screen now provides a summary of active capital calls with the ability to view individual call details.
  • Navigating to a capital call allows you to view further call and investor details along with a full investor list which can be filtered by Paid and Unpaid calls.
  • The Fund Details page now also provides a capital summary and the ability to view a list of Active, Drafted, and Completed calls.


Cashless Exercising on Mobile

Carta users will now be able to perform a Cashless Hold Exercise and Cashless Sell Exercise on the mobile app. 

Who this affects

  • Public Markets Users

Supported Platforms

  • iOS and Android

What’s new

Users with holdings in public companies on Carta will now be able to exercise and sell their shares via a Cashless Hold or Cashless Sell transaction while on-the-go through the Carta mobile app. These features were previously available to users via desktop, and this launch closes the previously existing gap in functionality between the Carta web experience and the Carta mobile app. 


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