Cap Table Liquidity & Private Secondary Markets3 min readUpdated September 2026

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

Here's a worked example: a founding partner in your cleared defense contractor wants liquidity, but any ownership change at a facility holding a security clearance can trigger a foreign ownership, control, or influence review. That single fact should shape the entire deal.

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The scenario

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.

Running the Carta path

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.

Why the buyer's identity matters as much as the price

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.

Why is Forge the wrong idea for a cleared contractor?

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.

What actually gets this deal done

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.

What facility security counsel will want to review

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.

A realistic timeline given the FOCI review

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.

Is a domestic buyer the same as a clean structure?

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.

Executive Capability Standard

What Good Looks Like

A cleared federal or defense contractor identifies a specific, vetted buyer and gets facility security counsel's read on FOCI review requirements before finalizing price on any equity transaction.

Building The Capability (5-Stage Skill Ladder)

1. Learn:Understand what facility clearances the company holds and what ownership changes could trigger a FOCI review.
2. Do Manually:Get facility security counsel's read on a specific proposed buyer's ownership structure before pricing anything.
3. Delegate:Assign a facility security officer or outside counsel to own the FOCI review process through closing.
4. Automate:Track cap table and equity in Carta once the buyer and FOCI review outcome are both settled.
5. Buy:Run the share buyback through Carta only after FOCI review or mitigation requirements are resolved.

How to Get Started

Disclosure: We may earn a commission if you buy through some links on this page. It doesn't change what we recommend.

Bizee

Keep the entity's filings current, since a FOCI review typically includes a close look at corporate standing and structure.

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Mercury

Hold buyout funds in a Mercury account kept separate from funds tied to any classified contract performance.

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Frequently Asked Questions

What triggers a FOCI review for a cleared contractor?

Broadly, any change in ownership, control, or influence that could affect the safeguarding of classified information, which can include foreign capital or influence anywhere in a buyer's ownership chain, even for a nominally domestic buyer. Get facility security counsel's read on your specific transaction rather than assuming a domestic buyer is automatically clear.

Why is Forge's marketplace a bad fit for a cleared defense contractor?

An open marketplace transaction makes it harder to know and control a buyer's full ownership structure and nationality in advance, which is exactly the information a FOCI-sensitive transaction needs reviewed before it closes. A specific, known, vetted buyer is a much safer starting point than an anonymous marketplace listing.

Does Carta handle FOCI review as part of running a tender offer?

No. Carta administers the mechanics of pricing and running a structured buyback but has no visibility into Defense Counterintelligence and Security Agency requirements or FOCI triggers. That review has to happen separately, with facility security counsel, before the transaction closes.

About the numbers

This guide doesn't quote a sourced benchmark. Figures in it are estimates or general guidance, so check them against your own numbers.

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