Off-Platform Payment Settlement (Capital Markets)
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 email@example.com to figure out the best path towards liquidity.
1. Brokerage accounts and other brokerage services are offered through Carta Capital Markets, LLC. Carta Capital Markets, LLC is a member of FINRA/SIPC.