Carta vs Forge When Your Shareholders' Agreement Already Picked the Process

Sponsor-drafted shareholders' agreements in lower-middle-market deals commonly include a right of first refusal favoring the sponsor, tag-along and drag-along rights tied to the sponsor's own exit, and often an outright restriction on management equity transfers absent sponsor consent. These terms exist specifically to prevent management equity from trading independently of the sponsor's own timeline and process, which is exactly the scenario being asked about here.

If the sponsor authorizes a structured buyback, perhaps funding a partial management liquidity event ahead of its own exit to retain key talent, Carta can administer that transaction cleanly and keep the cap table accurate. Carta has no independent authority to initiate a transaction the shareholders' agreement doesn't already permit; it's a tool for executing a process someone with the right authority has already approved.

Even setting aside that Forge's outside buyer network is built around companies already recognizable to institutional secondary buyers, mostly venture-backed technology names, rather than lower-middle-market operating companies, a marketplace listing still can't override a contractual right of first refusal or consent requirement. If the sponsor has a ROFR, it gets the first opportunity regardless of where else shares might otherwise be offered.

Rather than weighing Carta against Forge, ask the sponsor directly whether it would consider authorizing a management carve-out or partial secondary liquidity event, which some sponsors do offer as a retention tool ahead of their own exit, particularly when the fund is performing well and wants to keep key management engaged through a longer hold period.

Bring these questions to the sponsor in a deliberate conversation:

• Would the sponsor consider authorizing a management carve-out or a partial secondary liquidity event ahead of its own exit?
• Is a retention-focused liquidity event realistic given how the fund is performing and how long the hold may run?
• How would the equity be valued: the fund's most recent mark, an independent valuation, or another formula?
• Would participating now change your position in the eventual full exit?

Frame the request as a retention conversation, not a signal of dissatisfaction: management teams that ask about liquidity options while clearly staying engaged and focused on performance are treated very differently than a request that reads as someone trying to check out early. If multiple management team members share the same interest, consider raising it collectively through whoever has the closest relationship with the sponsor, rather than each person approaching separately.

Expect an initial answer from the sponsor within two to four weeks of raising it directly. If the sponsor is open to a management liquidity event, actually structuring and closing one typically takes several months, since it usually involves updating the shareholders' agreement, valuing the equity, and often coordinating with the fund's own investors or lenders. This isn't a fast process even when the sponsor says yes.

The most common mistake is a management team member raising the liquidity question informally, in a hallway conversation or an offhand comment during a board meeting, rather than through a clear, deliberate request. Say a general manager mentions wanting some liquidity almost in passing during a routine update, and the sponsor, focused on other agenda items, doesn't register it as a real request needing a real answer.

Raise it as its own conversation, scheduled deliberately, ideally with a clear ask, rather than folding it into an unrelated update where it's easy to miss or discount. Request a specific meeting for this topic alone, come with a clear sense of what you're asking for (an amount, a rough timeframe, and why now), and follow up in writing afterward summarizing what was discussed, so there's a clear record the conversation actually happened and wasn't just background noise in a busier meeting.

If the sponsor is open to a management carve-out or secondary liquidity event, negotiate clear, written terms on valuation methodology, whether it's tied to the fund's own most recent mark, an independent valuation, or some other formula, and whether participating now affects your position in the eventual full exit, including any carried-interest or promote structure tied to your management equity.

Also negotiate whether other management team members will be offered similar terms, since inconsistent treatment across the management team on something this sensitive can create real friction even among people who otherwise work well together, and it's a fair question to raise directly with the sponsor rather than assuming it will be handled evenly.

Put any agreement that results from this conversation in writing, formally amending the shareholders' agreement if needed, rather than relying on an informal understanding with the sponsor that might not survive a change in the deal team or the fund's own leadership.