Carta vs Forge When FOCI Rules Make 'Any Buyer' the Wrong Strategy

Say the company holds a facility security clearance needed for several of its contracts, and a founding partner who owns 25% wants to sell most of her stake. The buyer under consideration is a domestic private investor with no obvious foreign ties, but the company has never gone through a FOCI review before and isn't sure what triggers one.

Carta Liquidity can administer the mechanics of a structured buyback, setting a price, running the tender, updating the cap table. It has no visibility into Defense Counterintelligence and Security Agency requirements or FOCI review triggers, so using it doesn't answer the central question here: whether this specific ownership change, to this specific buyer, requires review or mitigation before it closes.

FOCI review considers whether foreign ownership, control, or influence exists at a level that could affect the safeguarding of classified information, and even a domestic buyer's structure, its own investors, its board composition, can raise questions if there's foreign capital or influence somewhere in the chain. Before agreeing to a buyer, whoever they are, get that buyer's own ownership structure reviewed by facility security counsel, not just the buyer's ability to pay.

Forge's marketplace connects sellers with a broad network of outside accredited and institutional buyers, and that's precisely the wrong mechanism for a cleared contractor: an open marketplace transaction makes it far harder to control or even know the buyer's full ownership structure and nationality in advance, which is exactly what a FOCI-sensitive transaction needs to manage carefully from the start.

In this example, the real sequence is: identify a specific, ideally already-known, buyer whose ownership structure can be reviewed in advance, get facility security counsel's read on whether the transaction triggers FOCI review or requires a mitigation agreement, resolve that before finalizing price, and only then use Carta to formalize the share mechanics.

Facility security counsel will typically want the buyer's full ownership structure, including any investors behind the buyer, board composition, and any foreign investment, board seats, or debt anywhere in that chain. This review needs real specifics, not a general assurance that the buyer is a domestic investor, since FOCI review considers the whole structure, not just the buyer's stated nationality.

Give facility security counsel these specifics about the buyer:

• The buyer's full ownership structure, including every investor behind the buyer.
• The buyer's board composition, including who sits on it and who appointed them.
• Any foreign investment, board seats, or debt anywhere in the ownership chain.
• Concrete details rather than a general assurance that the buyer is a domestic investor.

Budget eight to twelve weeks if a FOCI review or mitigation agreement is required, since Defense Counterintelligence and Security Agency review timelines are typically the longest part of a transaction like this, longer than pricing or the Carta mechanics themselves. If the buyer's structure is clean and the review confirms no FOCI concern, the remaining transaction steps can close in a few additional weeks.

The most common mistake is treating a domestic buyer as automatically clean from a FOCI perspective without tracing that buyer's own investors and financing sources. Say the buyer is a US-based investment vehicle, but one of its own limited partners is a foreign entity with a meaningful stake; that detail, even several layers removed from the direct transaction, can still be relevant to a FOCI review.

Facility security counsel needs the full structure, not just the name on the purchase agreement, to give an accurate read before you commit to price or timeline. Request a complete ownership and financing disclosure from any prospective buyer as a condition of serious negotiation, before price is discussed in detail, so facility security counsel can flag any concern while there's still time to address it or walk away without having already agreed to terms.

It's also worth making a clean FOCI review outcome, or an accepted mitigation agreement, an explicit condition precedent to closing, structured so that if the review surfaces an unresolvable concern, either side can walk away without penalty. This protects both the founding partner and the company from being contractually locked into a transaction that a federal review later blocks or substantially complicates, and it's worth agreeing upfront who bears the cost and timeline risk of the review itself, since it can take longer and cost more than either side initially expects.