workshop 1c trials and tribulations of running a private ...€¦ · trials and tribulations of...

Aspirations by Stock & Option Solutions Nov.4, 2014

www.sos-team.com 1

Trials and Tribulations of Running A Private

Company Global Stock Plan

Nancy Boling, SurveyMonkey

Valerie Diamond, Baker & McKenzie LLP

Karen Ip, Uber Technologies Inc.

Marlene Zobayan, CEP, Rutlen Associates LLC

November 4, 2014

2

� This presentation contains general information only and the speakers and represented firms are not, by means of this presentation, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. The speakers and firms shall not be responsible for any loss sustained by any person who relies on this presentation.


www.sos-team.com 2

3

� Introductions� Design considerations and constraints� Regulatory issues for private companies◦ Securities◦ Labor law◦ Data privacy◦ Foreign exchange

� Taxation� Communications� Vendor considerations� What’s the end game?� Tender offers� Questions

4

� When founded – 2011 (via recapitalization of the former

entity founded in 1999)

� Number of employees approximately 450 (350 US and 100+

International)

� Types of awards offered – Generally stock options and RSUs

� Number of countries: 12 countries but granting equity in 5

countries

� Top or particularly problematic countries

◦ Australia

◦ UK

◦ Ireland


www.sos-team.com 3

5

� Founded: 2010

� Number of employees: 1,600 (U.S 1200; non-U.S, 400)

� Types of awards offered: Stock Options

� Number of countries: 50 countries

� Top problematic countries:� Philippines

� Vietnam

� Thailand

� Malaysia

CONFIDENTIAL – PROPERTY OF UBER TECHNOLOGIES, INC.

6

� Pros:◦ Pre-IPO prices

� Tax planning opportunities

◦ More flexibility

◦ Under the compliance radar?

� Cons:◦ Lack of liquidity

◦ Limited resources / cash

◦ Minority shareholders

◦ Terminated employees

� Considerations:◦ The end game


www.sos-team.com 4

7

� An offer of equity compensation is an offer of

securities

◦ Laws vary by location

◦ Some countries provide exemptions for employee plans

◦ Territorial in nature

8

� Australia – Okay if under 20/12 months and A$2M (no RSU exemption)

� China – CSRC approval? No cashless exercise� European Union - Prospectus� Indonesia – 100 offers/50 purchases? � Israel – Okay if under 35/special exemption for private cos.� Italy – Financial Intermediary/door-to-door exemption� New Zealand – Overseas Issuer Exemption unavailable

(particularly for RSUs)/20/12 months exemption available� U.K. – Consultant grants (regulated activity?)� United States – Federal and Blue Sky� Usual Suspects – Colombia (100), Japan (50), Malaysia,

Philippines, Thailand


www.sos-team.com 5

9

� Global option or other award agreement (tax,

entitlement, privacy, etc.) with appendix (country

terms) vs. separate agreements

� Subplans for tax-favored treatment/qualified plans

� Special Forms:

◦ Exercise Notice / Agreement

◦ 431 Election / UK NIC Joint Election

� Electronic signatures (spousal consent?)

� Translations

� Employee Tax Information

9

10

� Employment Contracts

◦ Contract law

◦ Common law and statutory protections

� Equity Side Letter vs. Employment Agreement/Offer

Letter for new hires and promotion grants

� Works Councils

� Special Issues: Denmark


www.sos-team.com 6

11

� Is the consultant really an employee?

◦ Rules differ by country

◦ No local entity does not mean you do not have an employee

� Consultants vs. employees

◦ Securities exemptions

◦ Tax treatment

◦ Tax withholding

12

� Employee Consent

� Database Registrations

� Cross-border Transfers

� Third-Party Providers


www.sos-team.com 7

13

� Argentina

� China

� India

� Russia

� South Africa

� South Korea

� Ukraine

� Vietnam

14

� When is the transaction taxed?

� Is the employer required to withhold and/or report on

the income?

◦ Allowable tax withholding methods

� Coordinating between tax and legal

◦ Reporting requirements outside of payroll reporting

� Do social taxes apply?

◦ Outside the U.S. social taxes can be high & may be uncapped

� Will a corporate tax deduction be allowed?

� Are tax-favored plans available?


www.sos-team.com 8

15

� Australia

◦ Ordinary shares requirement for Deferral Concession

� Canada

◦ Use of Prescribed Shares can exempt 50% of stock option

income from taxation (among other conditions)

� United Kingdom

◦ No withholding or social tax (National Insurance or NIC) for

non-Readily Convertible Assets

16

� Availability of qualifying plans (general)

◦ France

◦ Israel

◦ United Kingdom

� Other beneficial regimes

◦ Canada

◦ Italy

◦ Spain


www.sos-team.com 9

17

� Qualifying plans just for small companies◦ France – Bons de Souscription de Parts de Créateurs d'Entreprise

� To qualify (among other conditions)

� Not quoted or market capitalization less than €150M

� Younger than 15 years

� Officer or employee of French company

� Benefits

� Income tax free/ capital gains tax regime

◦ United Kingdom – Enterprise Management Incentive

� To qualify (among other conditions)

� Gross assets of less than ₤30million

� Worldwide employees less than 250

� Benefits

� Income tax free/ capital gains tax regime

18

� Fair market value requirements

◦ India

◦ Italy

◦ Malaysia

◦ United Kingdom

◦ United States

� Mobile employees


www.sos-team.com 10

19

� Summarize the impact to the following by country◦ Company◦ Employee◦ Plan documents◦ Grant agreements◦ Employee withholdings◦ Employer withholdings◦ Reporting requirements◦ Net settling

� Legal implications

� Accounting

� Share and communicate as early as possible with various depts..◦ Legal◦ HR◦ Accounting◦ Finance

20

Taxing Point and Taxable

Amount

Sourcing for Mobile

Participants

Employer Withholding

Employer Reporting

Employer Paid Taxes

Withholding Tax Rate

Net Settlement of Awards (Legal)

20

By country


www.sos-team.com 11

21

� Translations

� Communicating value◦ Can be challenging when there is no open market for the stock

◦ Becomes easier as an IPO event draws closer

� New Hire Orientation� Difference between private and public company stock

� If granting ISOs - explain taxation (AMT)

� Ready to IPO?◦ Break training into sections

� Broker introduction

� ESPP introduction

� Lockup period introduction

22

� Consideration of private company needs◦ Many vendors are now modifying their stock administration

applications for private company use

◦ Selecting the wrong vendor can be frustrating and costly so question thoroughly

� Picking vendors for current and future needs◦ Is you company planning an IPO, if so find a vendor that can

make the transition with you

◦ Think about growth, can your vendor keep up with rapid growth

� Costs◦ Make sure you negotiate cost, especially if going public


www.sos-team.com 12

23

� Additional rounds of funding?

� IPO?

� Acquisition by private/public company?

� Anticipating and/or preparing public company plans

� Tender Offers/Secondary Markets

24

� The Good – a “Win Win”

◦ Provides employees and investors liquidity without the hassle

or cost of going public

◦ May hire a third party to administer

� Distributing secure documents

� Preparing 1099Bs

� Utilizing data from current equity system

◦ Third party may not be necessary if only repurchasing shares

from employees

◦ Back office support


www.sos-team.com 13

25

� The Bad –◦ Administrator cost

◦ Determining employees’ cost basis

◦ NSOs and RSUs - Required holding period to avoid deemed cash settlement

� The Ugly -◦ Absorbing data back into equity system

◦ Ensuring the accuracy of the imported data

◦ NSOs and RSUs held less than 6 months may not be allowed

◦ May result in liability accounting if include stock held less than 6 months (Stock held as a result of RSU vesting or NSO exercise)

26

Nancy Boling

SurveyMonkey

[email protected]

(650) 543-8485

Valerie H. Diamond

Baker & McKenzie LLP

[email protected]

(415) 576-3086

Marlene Zobayan

Rutlen Associates LLC

[email protected]

(650) 868-9282

Karen Ip

Uber Inc.

[email protected]

(415) 842-3723


www.sos-team.com 14

workshop 1c trials and tribulations of running a private ...€¦ · trials and tribulations of...

Documents