The High-touch Legal Services® Blog…for Startups!

© 2009-2020 Dana H. Shultz, Attorney at Law

Stock Transfer Ledger Available for Download

Stock transfer ledger templateToday I added a stock transfer ledger template to the documents available for free user downloads. Corporations can use this template to help track the issuance of shares and transfer (or repurchase) of shares after they have been issued.

At the Downloads page, click on Stock Transfer Ledger. You browser then will make the stock transfer ledger file (an Excel spreadsheet) available for download.

I was prompted to make this file available by a question on Quora (What’s the best way to establish an electronic version of a corporate share register?).

Related post: How Do We Issue Corporate Shares?

Dana H. Shultz, Attorney at Law  +1 510-547-0545  dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

What is a Stock Assignment Separate from Certificate?

Image of a Stock Assignment Separate from Certificate

I recently introduced a client to the document called a Stock Assignment Separate from Certificate. While well-known to business lawyers, this document is not known to most business owners.

The client was implementing employee and management stock plans. To provide stock for the plans, the corporation was going to repurchase shares from the founders.

The CFO asked whether and how the founders should complete and sign the assignment provision on the back of their share certificates.

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IncNow Joins Hall of Shame

Logo for IncNow, the subject of this blog post

Almost two years ago, I wrote about how Delaware corporations with no-par-value stock can find themselves obligated to pay extraordinarily high franchise taxes (In Delaware, No-Par-Value Can Cost a Bundle). Yesterday, a reader of this blog pointed out that IncNow, an online incorporation service, virtually lures naive customers into this tax trap.

Here is what the reader reported to me:

  • IncNow’s default assumption is that no-par stock will be issued.
  • IncNow does not invite the user to specify a par value (in contrast to LegalZoom, for example, which does).
  • IncNow’s representative said that the reader “could assign a par value to shares, under special requests at the bottom of the checkout form” [emphasis added].

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How Can I Have Reverse Vesting in an LLC?

Quora logo

I recently received, via Quora, a private question about setting up an LLC membership interest (rather than shares of a corporation) with reverse vesting (see Rewarding Key Personnel: Restricted Stock or Options?). That question, and my answer, are reproduced below with minor editing.

Q. I am starting a company and forming as an LLC. My co-founder will received a reverse-vested membership percentage. I’ve found plenty of sample restricted stock agreements, but nothing for LLCs and memberships. Do you have any suggestions where I can find a sample agreement? (more…)

Accelerated Vesting may Mean Little if Your Employer is Acquired

Quora logo

This post is adapted from a question that I answered on Quora. Q. How can an acquirer make an employee with single-trigger vesting commit to a “lock-up” period to receive all his shares? Say you’re an engineer at a just-acquired startup with 0.5% of the old company, and your shares fully vested upon acquisition. The acquirer’s terms were that current employees get 50% of their payout up front, and 50% if they stay on board for 5 years. How is that possible, legally?

A. It is difficult to provide a definitive answer without looking at the relevant documents. However, I suspect that this situation is possible because 50/50 pertains to shares in the acquiring company rather than the acquired company.

In my experience, acquired companies will put some effort into converting employee equity interests directly into comparable interests in the acquiring company, but there is no guarantee this will happen.

So you may (I can’t be sure, not having reviewed the documents) have a choice: Keep your 0.5% fully-vested interest in the acquired company (which is likely to have little, if any, market value in the foreseeable future), or accept the 50/50 conversion to an equity interest in the acquiring company.

Dana H. Shultz, Attorney at Law? +1 510 547-0545? dana [at] danashultz [dot] com
This blog does not provide legal advice and does not create an attorney-client relationship. If you need legal advice, please contact a lawyer directly.

Stock is Great – but Don’t Give It Away Too Quickly!

Most startups and early-stage companies have limited cash. As a result, they often are eager to use stock as a major component of? compensation. They need to make sure, however, that personnel stick around long enough to make the contributions for which they are being compensated.

In some instances, the corporation creates a tax-qualified incentive stock option plan. Employees are granted options to purchase stock, and they do not have to pay any tax on the stock (actually, on profits from their sale of the stock) until they exercise the option (purchase the stock, presumably, at a low price) and, later, sell the stock. (Tax law is less favorable to independent contractors.)

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