In order to influence possible withdrawals and stock exchanges, investors generally enter into two agreements before the IPO: the adoption of tax reform last December gave investors greater certainty about corporate tax rates in the near future. One consequence is the increased interest of some investors in acquiring payment rights under existing tax receivable agreements (TRAs). In short, ACCORDS are agreements made by a company (a “pubco”) as part of an IPO to monetize Pubco`s tax attributes after the IPO for the benefit of owners prior to the IPO and investors who acquire payment rights under TRAs to such pre-IPO owners. Our previous article on ARTs focused on some ways in which tax reform could affect the value of TRA payment rights. Since the introduction of tax reform, we have seen a marked increase in investor interest in the acquisition of TRA payment rights, including through hedge funds, family offices and private trust funds. This article describes some of the functions of an AED that an investor should analyze before acquiring rights under an AER. Contact your PwC advisor for more information and discussion in an up-C structure that might suit your organization. Each individual tra investment should be considered taking into account the specific provisions of the TRA and the facts applicable to the pubco concerned. These concrete facts may raise specific questions of diligence. However, there are a number of issues to consider for most PURCHASEs of TRA payment rights, including: As a traditional IPO, an up-C structure carries a multitude of accounting and tax complexes and related administrative burdens, which are unique to the structure. Such reflections generally require support and advice from people who specialize in these areas and also require routine recordings and interviews. An up-C structure can bring considerable benefits to any organization that wishes to go public.
Companies should conduct a thorough review when selecting an optimal ipo structure for their release and begin planning in a timely manner before their IPO. Key stakeholders should be identified at an early stage in the restructuring process and companies should assess the resources required to meet the requirements for maintaining a business structure and passing and complying with SEC requirements. Following the IPO, investors may either retain their shares in the operating hobby unit or decide to liquidate their shareholding prior to the IPO. In this case, prior to the IPO, investors may either exchange a portion of their shares for cash contracted as part of the IPO, or exchange those shares for publicly traded PubCo Class A common shares.