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Governance Insights

Navigating Disruptions & Deciding Who Should Manage Your Equity

Nth Round


January 9, 2024

Welcome to this week’s issue of Governance Insights!

Today, we’re exploring how boards can navigate periods of disruption, who should be in charge of equity, and what the Corporate Transparency Act means for private businesses.

But first…

“Carta exits secondary trading following credibility hit”

Over the weekend, the software company made headlines for allegations of misusing confidential customer data.

Accusations were first brought to light by Karri Saarinen, CEO of fintech startup Linear, saying, “As a founder, it feels kinda shitty that Carta, who I trust to manage our cap table, is now doing cold outreach to our angel investors about selling Linear shares to their non-disclosed buyers.”

Despite acknowledging the incident as, “an employee [who] violated our internal procedures,” Carta CEO Henry Ward announced Monday night that they would be leaving their secondary trading business.

Amid these unfolding events, we wanted to highlight our proactive stance. In a published article, CEO Graham McConnell reassured the industry of Nth Round's unwavering commitment to data privacy and trust.

Now to this week’s insights…

Weekly Board Topic: How to Handle Disruption

Navigating disruptions is a critical skill for private company boards. Whether facing economic headwinds, technological shifts–like the rise of AI, or unforeseen crises, boards must proactively adapt to ensure the sustained success of their organizations.

Here’s how to maintain shareholder confidence and employee morale during these unnerving times:

Be Proactive

Effective disruption navigation starts with strategic scenario planning. Boards must analyze potential disruptions–a competitor's disruptive innovation, a regulatory headwind, even a global supply chain snag.

Assess their impact on the business, and formulate proactive strategies that can be swiftly executed when needed.

Enable Agile Decision-Making

The ability to make agile decisions is paramount during disruptions. Boards should foster an environment that encourages open communication and rapid decision-making.

This may involve empowering management teams to quickly act within a framework and regularly reassessing strategies based on real-time data and market feedback.

Embrace Innovation

In the face of technological disruptions, such as the rise of AI, boards must actively embrace innovation. This includes staying informed about emerging technologies, assessing their relevance to the business, and integrating them strategically.

Establishing partnerships with tech-savvy firms can also provide a competitive edge.

Create a Communication Plan

Effective communication is vital during times of crisis. Boards should develop a comprehensive crisis communication plan that outlines clear and transparent messaging. This keeps shareholders, employees, and key stakeholders informed.

Be upfront about challenges, but frame them as opportunities for growth.

By adopting a proactive and adaptable approach to disruption, private company boards can weather unnerving periods and also emerge stronger and more resilient.

Who’s In Charge?

Private company equity is a complicated world of complex regulations, shifting ownership structures, and ever-evolving valuations. Establishing a clear framework for managing it all is a key piece to good corporate governance but it presents a unique challenge, particularly in determining who should hold the reins.

Should it be the ever-juggling CFO, a dedicated shareholder administrator, or perhaps an outsourced expert?

One size, as they say, does not fit all. Size, structure, and strategic priorities all factor in, but here’s what to consider when deciding who plays the lead in your equity management:


Often, the Chief Financial Officer assumes a pivotal role in equity management. Their financial acumen and understanding of the company's financial health make them well-suited for this responsibility. The CFO ensures alignment between equity programs and overall financial strategy, balancing the interests of stakeholders.

But as complexities increase, and given the increased role of today’s Modern CFO, someone to manage the day-to-day operations may be better positioned.

Shareholder Administrator

Appointing a dedicated shareholder administrator can streamline your equity management. This professional focuses exclusively on maintaining accurate cap tables, managing transactions, and addressing shareholder inquiries. Having someone in this clearly defined role can enhance efficiency and accuracy in equity-related processes.

It is, however, a luxury to be able to support this specific role. Limited resources and other priorities may make this seem like a nice to have rather than a need to have.

Technology Solutions

Leveraging equity management software can provide a cost-effective way to streamline equity management operations. Implementing integrated software solutions allows for automated tracking, reduces the margin of error, and provides real-time visibility into equity-related activities. This is particularly beneficial for companies with complex equity structures.

Onboarding new software can be challenging, but with the right partner, you can reap efficiency dividends rather quickly.

Collaborative Governance

When coupled together, internal team members and technology present a dynamic approach to equity management that harnesses both human expertise and the efficiency of advanced tools. This synergy ensures not only effective oversight but also streamlined processes for navigating the complexities of equity management.

The "who" may ultimately be less important than the "how" when managing equity, so be sure to have a secure framework to manage equity with confidence, transparency, and accuracy.

The Corporate Transparency Act: A New Era of Transparency

Effective January 1, 2024, the Corporate Transparency Act (CTA) establishes a new beneficial ownership information reporting requirement for many private companies. This is an increased effort by The U.S. Department of the Treasury to make it harder for bad actors to hide or benefit from ill-gotten gains via shell companies or other opaque ownership structures.

You should consult with legal, tax, and accounting professionals about how the CTA impacts your business specifically, but let’s take a look at some of the details to familiarize yourself with:

Do I need to report? Companies required to report are called reporting companies. They include domestic reporting companies such as corporations, limited liability companies, and other entities created by the filing of a document with a secretary of state or any similar office in the United States. As the CTA’s focus is on shell companies and other entities with limited or no operations, the CTA provides exceptions for other types of entities.

What do I submit? Reporting companies are required to report Beneficial Ownership Information (BOI). This refers to identifying information about the individuals who directly or indirectly own or control a company. The CTA defines a beneficial owner of an entity as any individual who, directly or indirectly, (1) exercises substantial control over the entity or (2) owns or controls no less than 25% equity in the entity.

Who do I submit to? BOI is submitted to the Financial Crimes Enforcement Network (FinCEN).  This is done online using the BOI E-Filing system. Basic information is required, such as each beneficial owner’s name, date of birth, residential or business address, and a unique identifying number from a driver’s license, passport or similar document.

As with any new regulation, there is an opportunity to review and fine-tune your reporting and governance practices. By approaching compliance strategically and leveraging technology and clear communication, you can emerge stronger and more resilient in the ever-increasing era of transparency.

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Happy reading!

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