We are a US company, with an IL subsidiary, who issues Section 102 & 3(i) grants to our Israeli employees. We are a long ways away from an IPO, so we do not have to worry about that yet. We use Carta for cap table management and then share the data and signed agreements to IBI for trustee purposes.
What is interesting to me is that 3 out of the 10 Option Grant types are Specific to Israel. Take a look at the options for Stock Option type (Securities -> Equity Awards - > Options - > Draft options). After ISO & NSO, 3 of the 10 types of Options are specific to Israel employees.
It's just strange that
Carta would cater specifically to
Israeli employees but then drop the ball in another critical part of the product.
Basically, I am seeing three big issues:
1. Can not use
online exercise (transaction through Carta) for Section 102 or 3(i) grants, and must proceed with the transaction outside of
Carta (the user sends the funds directly to the company) and record the exercise in the platform afterwards.
2. The way that Carta issues option grants & how the employee "signs" the option grant agreement is not acceptable to the Israeli Tax Authority (as we have been advised). It seems that this is known within Cartaand we have been advised that we need all Option Agreements to be signed via Docusign (or similar)
"Yes they would need to use a docusign workflow outside of Carta. All Israeli accounts have to execute their option grant documents through docusign and utilize us to give their employees access to the securities in an online portfolio and to keep a clean up to date cap table. If this company is a US company with Israeli employees, Docusign is still used. Israeli companies also execute documents off of Cartatypically via docusign."
3. We must use a workaround for in Carta to issue a certificate to an employee who exercises his options:
A workaround we use in case of Israeli options is to proceed as follows:
1. The stakeholder initiates the exercise and the options are exercised into a shares certificate;
2. The company creates a new stakeholder entry in the name of the trust on behalf of the grantee;
3. The company contacts Carta Support requesting that the certificate product of the exercise be reassigned to the stakeholder entry created for the trust, which is a staff tool. That way, the option grant can remain on the stakeholder's name, but the certificate is held by the trust.
Basically, we want to use
Carta as our full source of truth, but the limitations are forcing us to use multiple systems (Docusign) and processes (signing in Docusign &
Carta and then loading the Docusign into
Carta). This is not ideal.
Obviously, I would like to use Carta as our trustee as well (instead of IBI) but I am not holding my breath for that.
Anyone having similar issues? Any guidance for issuing securities & options to Israeli employees?