Evaluate Need for One-to-Many Association between Stock class and Stock plan?
dahal opened this issue · comments
First of all, a great initiative. We are currently building OpenSource captable management platform Captable, Inc. and we will follow the Open Cap Table Coalition format as much as possible and would love to collaborate.
I wanted to clarify what the expected associations are between these two tables/schemas, one to one or one to many? cc @JSv4
We are going with one to many association, that seems to make more sense.
Hey @dahal, thanks for the question. Each stock plan can only have one stock class linked to it, but you can have multiple plans linked to the same stock class - e.g. you could have three different stock plans all issuing common stock, which would all have the same stock class id. That in line with what you guys are expecting?
👋 additional context - Canadian corporations do have the ability to designate multiple share "classes" within a given stock/equity plan, which current versions of the OCF spec don't support. (e.g. An option pool of 5,000,000 shares, which can be issued in the form of option grants for either Voting or Non-Voting Common shares).
The Mantle team is going to look to provide some recommendations on how this scenario could be captured with adjustments to the OCF spec.
To make sure we're being as specific as we can be with the wording involved here - with Canadian capitalization definitions, the typical language we could see would indicate:
(i) an unlimited number of Common Shares, issuable in series, of which an unlimited number are designated as Voting Common Shares (the “Voting Common Shares”) and an unlimited number are designated as Non-Voting Common Shares (the “Non-Voting Common Shares” and together with the Voting Common Shares, the “Common Shares”)
So there's an implied hierarchical relationship between the overarching Common Share class and the Voting Common & Non-Voting Common series within it.
This also winds up being expressed in the Definitions section of Equity Incentive Plans:
"Common Shares" means the Voting Common Shares or the Non-Voting Common Shares in the capital of the Company;
At which point the individual option grants will specify which series the options would exercise into.
@jarrettq, just had an interesting discussion about this on the Law Firm Working Group. It can theoretically happen in the U.S. (which we knew), but it does happen now and again as well. Since it is something that happens in U.S. companies, though rarely, it'd be great to see what this might look like in OCF. If it's a light lift, definitely worth including.
@JSv4 ooo, great news 🙌 . The introduction of equity_compensation_issuance transactions has already opened the door, as well - the inclusion of non-plan awards added stock_class_id as a field to the issuance transaction, so it may primarily just be a matter of swapping in a stock_class_ids list for the stock_class_id field in the Stock Plan object and then adjusting validation logic and documentation as appropriate.
Another situation this will be more common is when companies are going public or have gone public. Some of the folks on the call noted they have seen this recently as well.