Endowment FAQ
Frequently Asked Questions about the CED Endowment Fund
- Am I being asked to pledge stock individually or is the Company being asked to donate?
- Will I transfer the stock now or will it be transferred later?
- Do I continue to have the right to vote the stock?
- Am I taxed on the appreciation in the value of the stock?
- What will my investors or venture capitalists think of this gift?
- Does this change the stock ledger for the Company?
- What will the stock be used for?
- Are there any restrictions in the charter for the Company or its bylaws that would prevent the transfer?
- Other Questions?
- CED's Endowment Fund main page
Am I being asked to pledge stock individually
or is the Company being asked to donate?
The stock is pledged by you individually, and therefore there is no dilution to other shareholders.
Will I transfer the stock now or will it
be transferred later?
At this point, all you are doing is pledging to transfer the stock at
a time in the future when there is a liquidity event for the Company
(i.e., IPO or sale of the Company). Due to tax consequences, it is important
to discuss with a tax advisor as soon as you begin planning for a liquidity
event. Timing is critical to ensure that you maximize your tax deduction.
Do I continue to have the right to vote the stock?
Yes, you continue to have the right to vote the stock until it is actually
transferred to the CED Endowment at the time of a liquidity event.
Am I taxed on the appreciation in the value
of the stock?
No, there is no tax on the appreciation but you will get to deduct the
fully appreciated value of the stock.
What will my investors or venture capitalists
think of this gift?
This does not affect them and therefore they will not be troubled by
it. They would only be concerned if the stock was being pledged by the
Company itself. In fact, the venture capitalists will not even know
of the pledge because it does not affect the ownership of the stock
until a liquidity event.
Does this change the stock ledger for the Company?
No, the stock is still held in your name until the liquidity event.
What will the stock be used for?
The stock, once transferred, will be sold and the proceeds will be used
to provide a long-term endowment that will fund CED's ongoing efforts
at education, capital formation, mentoring, and communications.
Are there any restrictions in the charter
for the Company or its bylaws that would prevent the transfer?
While some companies do have restrictions on transferring stock, most
of these terminate at the time of an IPO or liquidity event, and in
any event do not apply to mere pledges. You should discuss this with
the legal counsel for the Company.
Other Questions?
If you have additional questions, please contact Jim Ford at CED
at 919.549.7500 or via email at jford@cednc.org.