Syndicate Legal Advisory Services prepares the complete set of documents required for a corporation to sell shares of its stock directly to an employee, officer, or other service provider — the stock purchase agreement and the approval, securities-law, tax, and record documents that accompany it — in any U.S. state, whether as a stand-alone purchase, as a purchase under an equity incentive plan, or as the purchase of shares at a discount that makes part of the transaction compensatory. An employee stock purchase is used where the company wants the employee to have real ownership from the outset rather than an option; where a key hire is buying in alongside the founders; where an employee is exercising a contractual right to buy shares; or where a company prefers the simplicity of a sale to the administration of an option plan. Its documentation has to settle four things at once: the price and whether it is at fair market value (a discount is compensation, taxed as ordinary income and reportable on Form W-2); whether the shares vest and are subject to repurchase, which brings the Section 83(b) election into play; the securities-law exemption for the sale and the state notice filing; and the stockholder agreements and transfer restrictions the employee joins on becoming a stockholder. Working from the client’s answers to a structured intake and from the company’s charter, plan, capitalization records, and valuation, we draft the agreement and the accompanying documents so that the sale is validly approved, correctly priced and reported, exempt from registration, and reflected in the company’s records. State securities notice-filing fees, valuation fees, and other third-party charges are not included in the flat fee and are the sole responsibility of the client.
Scope of work includes:
Purchase planning and intake — a structured intake and written summary confirming the corporation’s state, charter, and authorized and reserved shares; the purchaser and the purchaser’s relationship to the company; the number and class of shares; the purchase price and its relationship to fair market value, with the compensatory-income consequence of any discount; the form of payment — cash, a promissory note where state law and the plan permit, the cancellation of indebtedness, or property; whether the shares will vest and be subject to a repurchase right on termination of service, and the vesting schedule, cliff, and acceleration where so; the company’s right of first refusal and the transfer restrictions, lock-up, and drag-along to attach; the stockholder agreements the purchaser will join; whether the purchase is under an equity incentive plan (and the shares available under it) or stand-alone; the securities-law exemption (Rule 701 for a compensatory sale to a service provider, or Rule 506 or the Section 4(a)(2) exemption for a sale at fair market value to an accredited or sophisticated purchaser) and the state notice filing; and whether the purchaser will make a Section 83(b) election.
Review of existing documents — review of the charter and bylaws (including any pre-emptive rights or investor consents that a new issuance triggers), the equity incentive plan where used, the capitalization table and stock ledger, the stockholders’, voting, and right-of-first-refusal and co-sale agreements, the purchaser’s offer letter or employment agreement and any purchase right in it, the most recent fair market value determination and its age, and prior approvals, with a written summary of the approvals and consents required and the agreements the shares will join.
Fair market value support — the documentation of the fair market value on the purchase date — the board’s determination and the independent valuation or recent financing price it relies on — and a note where a valuation should be refreshed, since the price relative to fair market value determines both the compensatory income and the 83(b) amount.
Stock purchase agreement — drafting of the agreement in full, addressing: the purchase and sale of the shares, the purchase price, and the payment terms (including the promissory note, security, and recourse provisions for a note purchase); the closing and the delivery of the shares; the representations of the purchaser — investment intent, accredited or sophisticated status as applicable, access to information, the restricted nature of the shares, and residency — and of the company; the vesting schedule, the continuous-service requirement, and the company’s repurchase option on unvested shares at the purchase price (and on vested shares at fair market value where agreed), with the exercise mechanics, payment terms, escrow of unvested shares, and stock power in blank; the acceleration provisions; the right of first refusal, the transfer restrictions, the market-standoff agreement, and the drag-along; the joinder to the stockholder agreements; the tax provisions — the purchaser’s responsibility for taxes, the withholding on any compensatory element, the Section 83(b) acknowledgment, and the Section 409A statement; the legends; the no-right-to-continued-service provision; and the notice, governing-law, and dispute-resolution provisions, with the spousal consent where community-property rules apply.
Section 83(b) election and tax documents (where shares vest) — the Section 83(b) election form, the thirty-day filing package, and the company’s record of the election, coordinated with the firm’s 83(b) service; the Form W-2 reporting documentation for any discount or, where no election is made, for the income at each vesting date; and the Section 1202 qualified-small-business-stock documentation where the corporation may qualify.
Approvals and issuance documents — the board resolutions approving the sale, the price and the fair market value determination, the consideration (and the note terms where applicable), the vesting and repurchase terms, and the escrow; the waiver of pre-emptive rights and the investor consents where required; the stock certificate with the legends or the uncertificated-share notice; the stock power and escrow receipt where shares vest; the updated capitalization table and stock ledger; the securities-law exemption documentation and the state notice filing; and the notifications to the transfer agent and plan administrator.
Records and tracking — the record book entry of the agreement and the issuance, the purchaser’s stockholder file, the vesting schedule and tracking worksheet where applicable, the Rule 701 aggregate-sales monitoring, the compliance calendar entries the purchase creates (the 83(b) deadline, the vesting dates and repurchase windows, the note payment schedule, and the 1202 holding period), and a one-page summary for the purchaser of what was bought, what is unvested, the tax consequences, the restrictions on the shares, and what happens on departure.
Deliverable: a complete, indexed purchase file (electronic and hard copy) containing the written summary of the review, the fair market value support, the executed stock purchase agreement and joinders, the spousal consent where applicable, the promissory note and security documents where used, the Section 83(b) election and filing confirmation where applicable, the approvals, waivers, and consents, the stock certificate or uncertificated-share notice, the stock power and escrow receipt where applicable, the updated capitalization table and stock ledger, the securities-law filings, and the compliance calendar, with a signature-ready version of each document for execution by the purchaser, the purchaser’s spouse where applicable, and the company.