Imagine if any new or existing company across the globe could instantly empower its employees, contractors and stakeholders by implementing PBE in days, without legal expenses, without hassles and with complete transparency.
That’s what Upstock has the power to do for tens of millions of businesses each year. That’s what’s new. Fortune 1000 companies have been doing this for years, but by using phantom stock. Upstock democratizes PBE by making it available to practically any business in the world.
Upstock is a cloud-based platform, so once data is loaded into it, it is available to everyone using the platform, subject only to administrative access controls. The basic steps are:
- The company’s founders allocate to the PBE pool a certain percentage of company equity. RSUs are the default form, although if a superior form of equity is available in a jurisdiction, Upstock can also support that (as well as standard equity). This PBE pool is for team members only, not for private investors or the public (unless the public means crowdfunding participants).
- Using Upstock, team members electronically sign legal documents approved by Upstock. No new legal documents need to be drafted. When these documents need to be updated or upgrades, Upstock does it automatically, including sending any required notifications to PBE recipients.
- Team members log time and/or tasks completed by using the Upstock platform. They can view their “dynamic equity” at any time simply by using Upstock’s dashboard. The pool fluctuates in near real time, displaying each team member’s then-current percentage of the equity pool. Simple pie charts and graphs facilitate this understanding.
- Upstock freezes this dynamic equity pool when a predetermined landmark event, such as an acquisition, IPO, or any change in control) occurs. Then, Upstock distributes the equity to each team member per the exact allocations in that frozen pool.
But: Is it legal? Yes, unequivocally so. In fact, Upstock’s system is based on the deferred compensation rules set forth in ERISA, the Employee Retirement Income Security Act of 1974, passed by Congress and signed into law by the President. From a technical perspective, Upstock uses a deferred compensation bonus which is dispersed when a change of control or other landmark event (IPO) occurs, provided that cash is available. ERISA is generally compatible with approximately sixty other countries, and we continue to add more all the time.
The key is this: Since the value of each team member’s equity is continually changing and has a substantial risk of forfeiture over time, it is not taxable until a ERISA-specific landmark event occurs. Thus, participants will only pay taxes if their pool is paid out. They will never be at risk of paying taxes for money they never see, as happened during the end of the dot-com era.