Carta Collective

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  • 1.  RSUs - A General Survey

    Posted 08-23-2023 09:31

    We are seeing an increase in our clients issuing RSUs, and unlike my clients in CA (I am in NM now), they need quite a bit more guidance with the internal processes for RSUs.  I am trying to get a general feel for how other (smaller) companies handle these so we can provide some 'standard practice' info to our clients, so I'm hoping to get some feedback here from those of you who regularly work with RSUs, specifically re:

    1. Settlement schedule: Are companies settling each RSU at each vesting milestone, or do you find that they're doing it on a set schedule for all outstanding RSUs (e.g., first of every month, quarterly, etc)?
    2. Taxes: Are companies handling the withholding internally, or do they engage with firms that specialize in this?  Are payroll services generally experienced with this, or do they need a specific service? (assuming they are unable to handle internally)

    Thanks in advance!

    - tj

    Teresa-Judith (TJ) Chartrand
    Blackgarden Law

  • 2.  RE: RSUs - A General Survey

    Posted 08-27-2023 17:39

    Hey @Teresa-Judith Chartrand! This is fascinating that you're seeing companies issuing more RSUs - my team and I have a few client-companies who do regular RSU net settlements (one does monthly, but changed to bi-annually, another does quarterly, another annually, and our newest client says they do their net settlements once every four years  - though I haven't yet verified if that's true). All of these clients are a bit later stage (series D+) and/or are profitable or have a plenty of cash, and they handle the calculations of payroll taxes in-house and with their payroll provider  (I haven't yet heard of any issues with the payroll providers not understanding how to do the tax calculations) - my team then helps them with the calculations of the number of shares to withhold, and the remaining cash to pay for the difference between the withheld shares value and their actual tax withholding.

    This is definitely a big change from the norm! I'm curious to hear what size of companies you're seeing transition to RSUs? And are you seeing any go with double trigger RSUs, or is it mostly single trigger? The biggest issue I've seen with smaller companies is that they don't have the cash or cashflow to support a single trigger RSU program (maybe that's why bi-annual or annual settlements are more common).

    Chris Hoffmann
    Founder, Equity Admin Co. - Carta admin for pre-IPO companies