If you're considering changing your corporate structure through a flip, you can probably guess there's lots of paperwork involved in the process. Once we've collected the required information from you and your co-founders, we'll make sure to involve you only when absolutely necessary.
We wouldn't ask you to sign a document without first giving you an overview of what it means. Here are all of the documents that require signature during your flip, organized by stage.
Incorporating in Cayman
The Client Information form, signed by every shareholder that owns ≥ 10% of the company OR is appointed director. It's a confirmation that our partners at Carey Olsen will verify the information you provided and ensure that the company is in compliance with local anti-money laundering rules.
The Beneficial Ownership form, signed by every shareholder that owns ≥ 25% of the company OR is appointed director. Contains all of the relevant information about each individual or entity shareholder, and you'll most likely need one per co-founder.
The Initial board resolutions, signed by all directors of the Cayman entity. The first document issued by the board, through which your company's directors will be appointed. If you've opted to set up a Stock Option Plan, it will also be put in place here.
A Registered office agreement, signed by the incorporator. Something like a rental contract for the registered office in Cayman, which is a government requirement. This is included in the Latitud Formation package, no need to go office-hunting in the islands!
The Economic substance form, signed by the incorporator. A filing required to ensure that your business is legit and operating under the guidelines of the international tax cooperation legislation.
Incorporating in Delaware
SS4 form, signed by the incorporator. An application form for an Employer Identification Number (EIN), which is a tax ID registration with the US government.
8821 form, signed by the incorporator. Authorizes the IRS to disclose your company's confidential information with the Latitud Formation partner in the US, this way we can make filings on your behalf.
8832 form, signed by the incorporator. Establishes your LLC as a disregarded entity in the US for taxation purposes.
A Unanimous Written Consent (AWC), signed by the incorporator. Appoints a Latitud Formation partner as a temporary assistant secretary for the LLC, meaning they'll be able to sign documents in the US on your behalf – if they didn't, you'd have to fly all the way there to sign them in person. It will also be used to appoint one of your company's founders as the Secretary for the US entity.
An LLC agreement, signed by the incorporator. Defines the company's bylaws and members, and establishes that the Cayman company is its only member, granting the validity of the AWC.
Connecting the Brazilian entity
A complimentary board resolution, signed by all directors of the Cayman entity. Issues the shares of the Cayman holding to your company's shareholder, establishing the chain of ownership with the Cayman holding, the Delaware LLC and the Brazilian LTDA.
A Unanimous Written Consent (AWC), signed by the director of the Cayman holding and the secretary of the LLC. Approves the Subscription and Contribution Agreement on behalf of the Delaware entity, and removes any and all representative powers from Latitud Formation partners.
Subscription and Contribution Agreement, signed by the directors in Cayman, secretary in Delaware, representative in Brazil and all founders. Sets up the chain of ownership with the Cayman holding, the Delaware LLC and the Brazilian LTDA, and officializes a symbolic transaction where shareholders of your existing LTDA in Brazil are trading their equity for equivalent shares of the Cayman holding company.
KYC forms, signed by each co-founder and by the administrator of the LTDA. Required by the banking service provider to perform the symbolic foreign exchange.
A contract for the symbolic foreign exchange, signed by all shareholders. According to Brazilian legislation, the flip transaction constitutes a foreign investment, meaning the investor(s) must execute a foreign exchange transaction with a bank to account for the acquisition even if no funds are actually remitted. You'll be asked to sign the receipt for the symbolic transaction so it can be filed with the Central Bank.
A Share restriction agreement, signed by all founders. Creates a vesting agreement between the founders and the company, protecting the business. It follows the standard 4-year vesting with 1-year cliff, and you can learn more about it here.
There'll be a separate agreement for each co-founder, signed by them and the co-founder who's acting as the incorporator. For example, given the following cap table:
John (incorporator)
Mary
Camilo
We require three batches of signatures:
John (and John)
John and Mary
John and Camilo
Amendment to the Contrato Social, signed by all founders and administradores. Updates the Brazilian LTDA's articles of incorporation, reflecting the new equity breakdown with only the Delaware entity as a shareholder, and appointing an Attorney-In-Fact to represent the owners of the LLC in Brazil.
Two Power of Attorneys, signed by the administrator of the Brazilian LTDA. One gives a Latitud Formation partner the authority to make compliance filings on behalf of the company, and the other temporarily appoints our partners at BHub as the attorney-in-fact for the Delaware LLC.
Proprietary Information and Inventions Assignments (PIIAs), signed by the Cayman director, the LLC secretary and the LTDA administrator. Transfers all of the intellectual property created by the founders to the Brazilian company. One will be created for each co-founder.
Got any questions?
Reach out at formation@latitud.com or via WhatsApp and we'll be happy to answer them.