LPs can now nominate a witness to provide a digital witness signature to their subscription documents during closings. 

What’s new?

Certain jurisdictions legally require a witness for subscription documents. A witness is a third-party individual who observes someone signing a document and provides a signature themselves to confirm that the original signature is genuine.

Previously, signature witnessing was a clunky process which involved downloading and signing physical documents. Now, signatures can be securely witnessed online in a few clicks. 

Who is it available for? 

Digital witnessing is available to fund administration customers and their LPs when closing a fund domiciled in the UK, Jersey, Singapore or the Cayman Islands.

How do I use it?

As an LP:

Upon signing the subscription documents, you will be prompted to add a witness and enter their details to complete signing. The witness will then receive an email. You can nudge the witness by resending the signature request email. 

As a witness:

You will receive an email informing you of the witness signature request.

Follow the link in the email to witness the signature on the LP’s subscription documents. 

After you have signed, you’ll receive an email confirming that the process is complete. 

As a GP:

You’ll be able to track the progress of signatories within Carta. 

When all signatures are complete, you can countersign the subscription documents. 

We are continuing to enhance the experience for QSBS-eligible companies and their shareholders. Recently, we have introduced the following features:

1. View previously sold QSBS eligible shares

Shareholders and admins can now see previously sold shares that were QSBS eligible. Users can view this information on Carta directly, as well as the QSBS PDF statement available for download by shareholders. 

Sold shares appear for investors and individuals in their portfolio:

Shareholders can also view the sold shares information on the QSBS PDF statement:

Shareholders can also view the sold shares information on the QSBS PDF statement:

2. QSBS columns added to the Investment dashboard export

Investors with holdings in QSBS eligible companies can now see the QSBS status, and if applicable, number of QSBS eligible shares the hold in the Investment dashboard export.

3. Financing history now included QSBS Attestation letter's to Company admins

Our QSB Attestation letter to companies now includes a section detailing the financing history of the company. This information impacts the 'aggregate gross assets' test our team preforms during the analysis.  

If you have any questions reach out to your assigned Carta account team or qsbs@carta.com to learn more!

Financial Reporting is improving the vesting schedule types supported and updating the UI so it's easier than ever to set it up and generate reports.

What's new?

New milestone award support

Milestones are a type of vesting schedule that can be set up at the grant level and that are vested by admins upon holders accomplishing certain achievements. Milestones can be used as a catch all alternative where a performance condition will not suffice. See this support article for information of what vesting schedule types fall under 'milestone vesting' at Carta.

Milestone awards that were granted historically will true up on the next report run in Financial Reporting. Any expense that would have been attached to these historically will be booked in the most recently run period. Contact 718@carta.com if you would like to discuss how to treat these awards.

Milestone awards with performance conditions are not supported at this point and will show at the errors tab of the disclosure report.

New revamped UI

1. New landing page (for new users)

2. Reduced workflow for setup by applying sensible defaults so users can generate reports with 1 click (for new users only).

3. Dedicated page showing the latest report, so users can easily access it and download again (for all users).

4. New manage settings button (for all users).

5. New report button now located in the report workflow modal (for all users).

Who is this available for?

Nearly all Financial Reporting customers have been updated. If you do not see this new view, please contact 718@carta.com for options on how to get this view enabled.

Anything else I need to know?

If you have any questions or want to talk to an expert about these new changes, reach out to 718@carta.com. 

Carta’s Financial Reporting  tools automatically generate the expense and minimum disclosure reports that auditors need so that you can easily comply with US GAAP and IFRS 2 accounting standards.

Early-stage companies now have a Financial Reporting product designed just for them. Standard Financial Reporting includes automatic expense tracking for equity spending and an audit package with all the supporting evidence and documentation auditors need for stock-based compensation (SBC) expense reporting. 

Features included:

• Automatic 409A valuations data ingestion

  • FMVs and Peers
• Annual reporting
• Audit package including SBC expense report, Minimum Disclosure report, and an audit guide detailing the assumptions we make and formulas we use
• Premier audit support
• Stock split support

Who is this available for?

Standard Financial Reporting is available to all Carta cap table customers, but specifically designed for early-stage companies preparing for their first few audits

Main Value Proposition

Automatically track your equity spending with Carta’s Standard Financial Reporting. Key benefits include:

1. Accurate, automated expense tracking: Tracks stock-based compensation expense, ensuring all cap table transactions are accounted for.
2. Time saved: Get your stock-based compensation (SBC) report, minimum disclosure report, and audit guide in 5-10 minutes, saving 1-2 weeks of manual calculations.
3. Compliance: Ensures compliance with the Financial Accounting Standards Board (FASB) requirements for booking SBC expense upon first issuance.
4. Historical expense calculation: Provides a one-time adjustment for historical expenses in your financial books.
5. Simplified auditing: Download an audit package with all necessary documentation, ready to send to your auditor.

In just a few clicks, Carta’s tool manages your stock-based compensation expenses, making your audit process seamless and efficient.

How do I use it?

• Go to Compliance > Financial Reporting
• Before getting started, make sure your cap table is up-to-date with all historical transactions including issuances, terminations, and cancellations.
• Click “Get started” and enter your financial statement end date. Then click “Generate expense.”
• Wait a few minutes while we do the complex accounting for you.
• Once expense is done generating, book your inception expense as a one-time adjustment in your financial books.
• Book your first FY expense in your financial book.
• When it’s time for your audit, download your audit package and send it to your auditor.
• If there have been any backdated adjustments made to your cap table, you can recalculate your expense before downloading your audit package for the most updated value.

Anything else I need to know?

All questions can be answered through our Financial Reporting support team, contact them via email 718@carta.com

Financial Reporting is making an improvement to the way we pull in cap table data, achieving data consistency with the cap table products for vesting schedule tranche values.

What's new?

Previously, Financial Reporting used our own First-In First-Out (FIFO) allocation method to assign exercised quantities to ISO/NSO security type tranches. This method did not always match the cap table, as the logic slightly differed. In order to provide consistent data between cap table products, such as equity reporting, equity awards ledger, equity award details, and Financial Reporting, the Securities team created API services, specifically Vesting and Options for award and tranche level quantities. With Financial Reporting’s integration of the Vesting and Options API service, the tranche values displayed in Financial Reporting reports will be improved to match other Carta products, achieving data consistency. 

Who is this available for?

All Financial Reporting customers will benefit from this new method Financial Reporting will be using to achieve data consistency with cap table products and equity reporting. More specifically, companies with ISO/NSO security types will have matching tranche quantity allocations with their cap table!

Main Value Proposition

Fully rely on Financial Reporting for your equity roll forwards! With a few clicks, Financial Reporting will provide accurate equity roll forwards and stock-based compensation expense for your financial statements and audits. Carta’s products talk to one another, which means you can easily rely on Financial Reporting to have accurate tranche quantities that match our other products.

How do I use it

No action required on the customer side. Customers will just continue to generate their financial reporting periods and the reports will correct themselves without disrupting the opening and closing balance of prior reporting periods. 

Anything else I need to know?

If you have any questions or want to talk to an expert about this new change, reach out to 718@carta.com

Sending 701 Disclosures is now seamlessly integrated into the issuance process on Carta. After drafting shares, a company can quickly run a report to check whether a 701 disclosure is required. If they are, they can upload and securely send to both new and existing stakeholders without leaving the app. 

What is a 701 Disclosure? Am I required to send them? 

A 701 Disclosure is a notice you may need to send to employees and investors if your company wants to sell or issue more than $10 million in securities within a 12-month period. This includes employees and other service providers who will be receiving equity in your company. They must be given the chance to review the disclosures before the purchase decision (or acceptance of an equity award) is made. You can read more about Rule 701 and how it applies to your company here. 

Companies can use Carta’s compliance features to check if they are required to send 701 Disclosures before issuing securities. Go to Essentials > Run reports to find the 701 report to check whether you meet this requirement.

Who is this available for? 

Companies in Scale. If you would like to upgrade your subscription to include Rule 701 Compliance, talk to your Account Manager or schedule a demo. 

How does it work? 

1. After drafting RSUs, click Add RSUs to the ledger.

2. Next, you will be prompted to either run a 701 report or begin preparing the 701 Disclosure without running a report. Running a 701 report will let you know if you are required to send 701 disclosures before issuing these RSUs. 

   1. NOTE: Clicking Prepare 701 disclosure does not trigger an email to your recipients or company signatories. 

3. After clicking Prepare 701 disclosure, you will be taken to the Communication Center,  where you can prepare a message and attach a disclosure PDF. Click Next: Choose recipients or Click Save Draft to save this draft for another time. 

   1. If you save your draft, Carta will add a reminder to the top RSU ledger. Click Draft Rule 701 disclosure on your RSU ledger to continue working on this disclosure.
4. Carta automatically includes all  RSU recipients of your drafted RSUs. Additional recipients can be selected from the table on the left, if applicable. To proceed, click Next.
5. Review the message and recipient list. If everything looks good, click Send communication.
6. Recipients will be able to access the disclosure from their Carta inbox as well as via email. 
7. Once all recipients have received this disclosure, Carta automatically sends RSUs to your company signatories.
8. As soon as signatories sign the RSUs, holders will receive them.

What will recipients see? 

Once a 701 Disclosure has been sent, recipients will receive the following email. This communication will be sent to the stakeholder’s Contact Email on file. 

How can I trust that these disclosures are sent securely? 

All disclosures will be watermarked individually. These documents will be shared with recipients directly in Carta, not over email. Your recipients will be blocked from downloading the document, and any admins on your account will see who opened the disclosure and when. Admins will also have access to analytics to see which pages of the disclosure each recipient spent the most time on. 

Can I resend a 701 Disclosure to a recipient? 

You cannot resend a 701 Disclosure in the app. If you need to resend a 701 Disclosure for any reason, contact Carta’s support team for assistance. 

What’s new?

Starting August 10, 2023, companies that issue NSOs and RSUs with event-based performance conditions attached to their vesting schedules will now be able to automatically calculate and expense these awards in their SBC Expense, Disclosure, and Dilution reports. Previously, companies that gave out awards with event-based performance conditions calculated their SBC Expense, Disclosure, and Dilution values manually outside of Carta. 

Who is this available for? 

All Carta Cap Table users with Financial Reporting in their subscription. If you do not yet have Financial Reporting in your subscription, please talk to your Account Manager or email 718@carta.com.

How does it work? 

• Log in to Carta, and navigate to Compliance & Tax > Financial Reporting. 
• Create a new report. The date range for the report should include the date when a performance award was granted.  
• Once an award has met all performance conditions, there will be a true-up of the expense and any values will be allocated accurately as per FASB US GAAP guidance.
• If the performance conditions have not been met, the expense will be reported as 0 per US GAAP guidance.

What’s an event-based performance condition? 

If an award has a performance condition, it means that the award has a vesting condition that is subject to performance-based criteria. An event-based performance condition is one in which vesting is contingent on a liquidity event such as an IPO.  Carta’s cap table includes support for NSO and RSU awards with event-based performance conditions. Now, companies that issue NSOs or RSUs with event-based performance conditions can automatically expense these options in their financial reports. 

How does Carta calculate the fair value assumptions? 

Companies can choose to use either Carta’s default fair value assumption or to create a customized one. Carta’s default fair values assumption is calculated with the Black Scholes pricing model, using your company’s Fair Reporting Value at an award’s grant date. 

Can I create reports using both US GAAP and IFRS scenarios?  

Not at this time. Companies can only expense awards with event-based performance conditions in US GAAP. 

Can I attach event-based performance conditions to a specific vest date? 

Yes. As of September 14, 2023, companies that issue NSOs and RSUs with event-based performance conditions attached to a specific vesting date can be expensed using our Financial Reporting tool.  

Where do I go if I have more questions about financial reporting? 

If you have more questions about our Financial Reporting product, please contact 718@carta.com. 

What’s new?

Legal Administrators can now group multiple cities under a single local jurisdiction for tax withholding purposes. 

Why is this an improvement?

Issuers now have greater flexibility in capturing jurisdictions where their participants pay taxes, particularly for county-level taxes or jurisdictions that are not specific to countries, states/provinces, or cities.

How does it work?

Navigate to Carta’s Tax jurisdiction and rates table by following Compliance & Tax -Tax Rules-Tax jurisdictions and rates.

Add a jurisdiction below the state or province level and select Multi-Regional Tax Jurisdiction. Enter all of the cities that belong to that jurisdiction.

The jurisdiction is then displayed as Multi-Regional. Any tax rate or rule set for the jurisdiction will apply to all stakeholders with tax addresses containing any of its included cities and will be used to calculate tax withholding for applicable transactions.

What's new?

Beginning on June 21, customers with both Carta 409A and Financial Reporting in their subscription will begin receiving two separate, audit-defensible reports: one with the Fair Market Value (FMV) used for tax purposes, and one with the Financial Reporting Value (FRV) used for accounting purposes.

Delivering these reports separately will more closely align with a changing regulatory environment in which tax guidelines under 409A and accounting standards under ASC 718 diverge.

Historically, Carta has only delivered a single report that values our customers' common stock under section 409A of the tax code. This singular report would double as a valuation used for both tax and accounting purposes, which introduced challenges for customers going through audits - companies are incentivized to keep their FMV low to keep options attractive for employees, while auditors may push companies to increase the Fair Value of stock when calculating stock-based compensation expense.

Disambiguating these two concepts allows our customers to work more flexibly with their auditors while still keeping options and other equity awards attractive as incentives for hiring and retaining talent.

What do I need to do?

If you're a customer with both Carta 409A and Financial Reporting in your subscription, you'll receive two reports the next time you request a 409A valuation from Carta: one with the Fair Market Value (FMV), and one with the Financial Reporting Value (FRV).

The FMV can be used as normal: pricing options, helping employees estimate their tax burden when exercising, Form 3921 filings, etc. The FRV can be used in Carta's Financial Reporting product to calculate the expense associated with stock-based compensation. Customers can work with their auditors to either directly use the provided FRV or adjust it from within Carta's Financial Reporting product as necessary.

For customers with access to both Carta 409A and Financial Reporting in your subscription, you’ll see an additional card for FRV at the top of the Valuations homepage in Carta (Compliance & Tax > 409A Valuations) once you receive and accept a new valuation report from Carta:

You'll also see an extra column in the table at the bottom of the Valuations homepage which shows historical FRVs side-by-side with historical FMVs:

How do I learn more or get help?

We've created a few help articles with detailed information about FRV and how this value differs from FMV and appears in Carta:

• Separate Reports for Fair Market Value and Financial Reporting Value
• 409A and ASC 718 Compliance: Carta’s Financial Reporting Value (FRV)
• Financial Reporting (V3): Carta’s Financial Reporting Value (FRV)

If you've received your FRV report and have further questions, feel free to reach out to val-operations@carta.com - we'd be happy to help.  

We’ve made some improvements

Beginning in May 2023, we are launching a new navigation experience - making it easier than ever to navigate your cap table, create and issue new securities, and manage relations with your stakeholders.

We are testing this experience with a select list of companies. Companies in this test will now navigate Carta’s equity management platform from the left-hand side. We are using this test to iterate on any improvements that need to be made and hope to roll out to 100% of new and existing companies by Summer 2023.

The new menu can also be collapsed for an optimized viewing experience by clicking the menu icon to the right of the Filter text box once you’ve landed in the right spot.

Finding what you need just got easier

The new navigation will make it easier for you to find what you’re looking for and complete critical tasks, with menu categories that are more intuitive and organized according to the type of task that needs to be completed within Carta. 

Terminology that just makes sense

We have also updated some of the terminology that appears throughout the Carta platform to clarify specific tasks and workflows. The changes that we’ve made are outlined in the table below.

FAQs

Why is Carta making this change? 

Carta offers a wide range of products and services, and users sometimes get  lost as they look through menu items in an effort to find the workflow or platform page they need to access. We understand that time is money, and the less time you spend locating the resources you need frees up more time for you to spend growing and managing your company. The new left-side menu enables users to have an immediate comprehensive view of Carta’s functionality with clearer verbiage, menu filtering, and collapsible dropdowns. 

Can I revert back to the old navigation experience? 

No. Our research has shown that our new navigation menu is not only more intuitive for users, but also faster. Beginning in May 2023, Carta is fully migrating away from the top navigation menu. We plan to be rolled out to 100% of companies by July 2023.

How do I use the new navigation experience to find what I’m looking for? 

The new navigation experience includes a filter to assist you in finding what you’re looking for. The menu will responsively pare down as characters are entered in the text box.

Additionally, left-side navigation enables you to expand and collapse multiple dropdowns at the same time, allowing for a more comprehensive overview of Carta’s functionality at a glance.

Did Carta remove any features? 

No. While the new menu may look more compact than in our current experience, all of the features that you have come to rely on are included in the new navigation. The goal of this initiative is not to change the functionality of Carta’s cap table, but rather, to make that functionality easier for you to find.