BlockTrades is planning a public offering

[dannotestein]

Can you issue 2 UIA's, one for US citizens, one for others, starting at 50%/50% split? It will be easier to operate imo. You can of course adjust the split percentage when needed.

How will you distribute your future profit, via buyback or dividend distribution?

By the way, if you post this in General Discussion board, it will attract more eye balls.

Splitting it  into two UIAs isn't a great solution, because US citizens should be allowed to sell to non US citizens at any time, since that only further lowers the percentage held by US citizens. Of course, we could allow the US UIA to be sold to anyone, but it still becomes a separate class of stock with more value than the other class (because it's not limited to who it can be sold too).

Maybe we could allow the US UIA to be "converted" to non-US UIA. This would gradually cause a continued decrease in US ownership.

But ideally, we want one class of stock where there's an attribute associated with the UIA that prevents non-whitelisted parties (e.g. US citizens) from purchasing the UIA when its total ownership would increase over 50% as a result of that purchase.

As for profit distribution, I suspect our primary method will be dividend distribution, although we might do buybacks if circumstances seem appropriate (e.g. if shareholders favor such a method). Cayman Islands law is pretty flexible in this regards, so it's mostly a case of what makes the most sense from the point of shareholders rather than legal regulations. The biggest issue from the buybacks point of view would be to avoid buying back enough that the ownership went above 50% US holders :-) So I think we will stick with dividend distribution initially.

[abit]

Can you issue 2 UIA's, one for US citizens, one for others, starting at 50%/50% split? It will be easier to operate imo. You can of course adjust the split percentage when needed.

How will you distribute your future profit, via buyback or dividend distribution?

By the way, if you post this in General Discussion board, it will attract more eye balls.

[CLains]

Excellent idea! Shares on a blockchain, paves the way for others to do the same 

[dannotestein]

After reviewing US tax law regarding ownership of foreign companies by US entities, we've concluded that it will be beneficial to reduce US ownership of BlockTrades (a Cayman Islands-based company) to under 51% as this will significantly simplify the tax reporting requirements for US stockholders. At 51% US ownership, it's classified as a "controlled foreign corporation", which is a pain in the neck to deal with now, and given the ever-changing and unpredictable US tax code, we've decided it's best for the company long term to get out of this classification.

Currently, BlockTrades is 100% US owned, so we're planning to sell 50% ownership to non-US investors. Due to US security laws, this offering will not be available to US citizens. Similarly, Cayman Islands security laws require that this offering cannot be made to Cayman Islands citizens. With the exclusion of these two groups, citizens of our countries (e.g. residents of Europe, Asia, etc) will be allowed to purchase shares.

We're not planning to make the actual offering yet: this thread is merely a "heads-up" that we've changed our planning in this regard and to get some feedback on potential methods we might use to ensure the 50% non-US citizen requirement (this latter issue will probably be of interest to other companies as well).

The actual offering will include a pro-forma profit/loss and balance sheet for the company, along with a discussion of our current and planned business activities, and an offering price.

We're planning to use a UIA to represent the stock shares. I think that the simplest way to initially meet the 50% requirement will be to create a whitelist that only allows trades/transfers by users who have been certified as non-US citizens (e.g. via passport, national card, etc).

A long term answer to this problem is more complex, however.  If at some point BlockTrades became less than 50% US owned, it would be nice if US citizens were able to purchase shares back up to the 50% amount. Currently we don't have anything in place in the exchange to support this ability, however. I'm not advocating such a feature be added now, but if we get more business focused on this kind of UIA (e.g. similar to what DACX was doing, but for startup companies rather than US listed companies), we may want to consider it at that point.