what you are asking for is anti-dilution provisions. What I've eyeballed are situations where price paid for the shares may depend upon circumstances of departure. It may be at market value if the founder/manager is deemed to be a good leaver, or it might be considerably less in the case of a bad leaver (eg breach employment contract or resigns). A note of caution I recall the case of Donaldson v FCT which dealt with the tax assessability of options. Here the tax Commissioner argued that the interest acquired by the employee was assessable in the YEAR the interest was GRANTED and assigned an arbitrary value to the notes depending on the year in which the options were exercisable. Don't end up in a situation where because of cashflow, the company owes a debt but the tax bill is immediate.Whilst a trust may appear complicated to founders, they serve a purpose in arms-length dealings. Currently the ATO operates a transferor trust regime as applied to family trusts, particularly of the discretionary type. (see Income Tax Assessment Act 1936 Part III of Division 6AAA). Unfortunately if you look at family court, the veil of trust privacy is increasingly being disregarded (in favor of wider public policy).
My suggestion is to sit and and work out the risk matrix (likelihood v impact) and focus on the biggest issues, seeking professional tax/legal advice where appropriate.Starting a serious company is not a hobby and especially if you want to attract professional investors down the track, a clean capital structure makes things so much easier for everyone. Lawrence http://www.linkedin.com/in/drllau however, i'd point out that putting shares in a trust is NO guarantee somebody won't get hit with massive capital gains tax down the track. On Sunday, 13 October 2013 20:55:25 UTC+13, J Antifaev wrote: > > Hi All, > > New addition to the group here - love the discussions and am hoping my > question is relevant to some others as well. > > I've got an ACT-based startup with a few founders and we are ready to > incorporate in order to receive some external grant funding. We are getting > stuck on the issue of how to properly set up the vesting mechanism for > founders shares. I'd really appreciate the guidance of anyone who has gone > through this process recently. > > Our baseline plan is to have all founders buy their shares after > incorporation at low value (e.g. $0.01) and then have a standard 1 year > cliff/4 year vesting for all shares, implemented by having a provision that > the company has the right to repurchase the shares at the original issue > price until the vesting criteria are met. For example, if Founder Bob > initially buys 1,000,000 shares at $0.01 each, and 500,000 of them have > vested when he exits the picture, the company can buy the other 500,000 > back for $5000. > > The problem we are struggling with is: what happens if we have already > done another funding round at a different valuation? For instance, let's > say that before the company buys back those 500,000 shares from Founder Bob > at the original issue price, the company does a Series A found with shares > priced at $1.00. When the company buys Founder Bob's 500,000 shares back at > $0.01 each, will the company be considered to have made a "gain" of $0.99 > per share ($495,000)? We are worried about this because it could impose a > big tax liability on the company at a time when cash is still tight. > > Is this a real risk, and if so, is there a better way to handle founder > share vesting without the need for a trust? A specific alternative would be > very helpful to us! > > Thanks, > > James Antifaev > -- -- You received this message because you are subscribed to the Silicon Beach Australia mailing list. Vist http://siliconbeachaustralia.org for more Forum rules 1) No lurkers! It is expected that you introduce yourself. 2) No jobs postings. You can use http://siliconbeachaustralia.org/jobs To post to this group, send email to silicon-beach-australia@googlegroups.com To unsubscribe from this group, send email to silicon-beach-australia+unsubscr...@googlegroups.com For more options, visit this group at http://groups.google.com/group/silicon-beach-australia?hl=en?hl=en --- You received this message because you are subscribed to the Google Groups "Silicon Beach Australia" group. To unsubscribe from this group and stop receiving emails from it, send an email to silicon-beach-australia+unsubscr...@googlegroups.com. For more options, visit https://groups.google.com/groups/opt_out.
