11. STOCKHOLDERS’ EQUITY

Prior to the reorganization described in Note 1, Silvercrest was a private company. SLP historically made, and will continue to make, distributions of its net income to the holders of its partnership units for income tax purposes as required under the terms of its Second Amended and Restated Limited Partnership Agreement and also made, and will continue to make, additional distributions of net income under the terms of its Second Amended and Restated Limited Partnership Agreement. Prior to the reorganization, all distributions were treated as equity transactions and recorded in the consolidated financial statements on the payment date. Partnership distributions totaled $1,248 and $5,244, for the three and nine months ended September 30, 2014, respectively.  Partnership distributions totaled $1,427 and $29,327 for the three and nine months ended September 30, 2013, respectively. Distributions paid or accrued prior to June 30, 2013 are included in partners’ capital and excess of liabilities, redeemable partners’ capital and partners’ capital over assets, respectively, in the Condensed Consolidated Statements of Changes in Stockholders’ Equity/Partners’ Deficit. Distributions accrued and paid subsequent to June 30, 2013 are included in non-controlling interests in the Condensed Consolidated Statements of Financial Condition.

SLP distributed $10,000 to its existing partners prior to the consummation of the IPO.

Prior to the reorganization and pursuant to SLP’s Second Amended and Restated Limited Partnership Agreement, as amended and restated, partner incentive allocations were treated as distributions of net income. The remaining net income or loss after partner incentive allocations was generally allocated to the partners based on their pro rata ownership. Net income allocation is subject to the recovery of the allocated losses of prior periods. Distributions of partner incentive allocations of net income for the nine months ended September 30, 2014 and 2013 amounted to $14,206 and $12,104, respectively. The distributions are included in non-controlling interests in the Condensed Consolidated Statements of Financial Condition and Condensed Consolidated Statement of Changes in Stockholders’ Equity/Partners’ Deficit for the nine months ended September 30, 2014 and 2013. As part of the reorganization, partner incentive distributions for the six months ended June 30, 2013 were treated as an equity transaction and accrued and recorded in accrued compensation in the Condensed Consolidated Statements of Financial Condition. Subsequent to the consummation of the IPO, Silvercrest treats SLP’s partner incentive allocations as compensation expense and accrues such amounts when earned. During the nine months ended September 30, 2014 and the three months ended September 30, 2013, SLP accrued partner incentive allocations of $13,062 and $3,175, respectively, which is included in accrued compensation in the Condensed Consolidated Statements of Financial Condition.

The pre-IPO partners of SLP received Silvercrest shares in connection with the reorganization and IPO, as described below.

Silvercrest—Stockholders’ Equity

As described in Note 1, Silvercrest’s equity structure was modified in connection with the IPO-related reorganization.

Silvercrest has the following authorized and outstanding equity:

Silvercrest is dependent on cash generated by SLP to fund any dividends. Generally, SLP will distribute its profits to all of its partners, including Silvercrest, based on the proportionate ownership each holds in SLP. Silvercrest will fund dividends to its stockholders from its proportionate share of those distributions after provision for its income taxes and other obligations.

In connection with the reorganization and IPO described in Note 1, “Reorganization and Initial Public Offering”, Silvercrest issued the following shares on the date of the reorganization:

Class A Common Stock

Silvercrest issued 4,790,684 shares of Class A common stock in the IPO. Each Class B unit of SLP acquired by the Company with proceeds from the IPO immediately converted to a Class A unit. Class A units have the same rights as Class B units. During July 2013, the Company issued 718,603 shares of Class A common stock pursuant to the underwriters’ exercise in full of the over-allotment option that the Company granted to the underwriters in connection with its IPO. During November 2013, 2,013,677 Class B units were automatically exchanged for Class A common stock upon the death of the Company’s former Chief Executive Officer and as per the terms of an exchange agreement entered into with the Company’s principal, a corresponding amount of Class B common stock was redeemed by the Company.  During May 2014, 1,297 Class B units were exchanged for Class A common stock upon the resignation of a partner.  During the quarter ended September 30, 2014 limited partners elected to exchange 133,739 Class B units for Class A shares pursuant to the terms of the resale and registration rights agreement between the Company and its principals.  

Class B Common Stock

In February 2014, the Company purchased from a former partner 16,530 shares of Class B common stock at a price equal to the par value thereof in connection with the repurchase of a like number of Class B Units from such former partner at a price of $14.50 per share.

In February 2014, the Company issued 261,958 shares of Class B common stock upon the vesting of deferred equity units which resulted in the issuance of a like number of Class B units of Silvercrest LP. The shares of Class B common stock were issued pursuant to the terms of the Certificate of Incorporation of the Company which requires the Company to issue at the par value per share of Class B common stock, one share of Class B common stock for each Class B Unit of Silvercrest LP issued.    

In May 2014, a former partner surrendered 5,893 shares of Class B common stock at a price equal to the par value thereof in connection with the surrender of a like number of Class B Units from such former partner at a price of $17.73 per share. 4,596 shares of the Class B common stock were surrendered in settlement of an outstanding note receivable in the amount of $81 from the former partner.

During the three months ended September 30, 2014, the Company redeemed from existing limited partners 133,739 shares of Class B common stock in connection with the exchange of a like number of Class B units to Class A common stock pursuant to the resale and registration rights agreement.

The total amount of shares of Class B common stock outstanding and held by principals equals the number of Class B units those individuals hold in SLP. Shares of Silvercrest’s Class B common stock are issuable only in connection with the issuance of Class B units of SLP. When a vested or unvested Class B unit is issued by SLP, Silvercrest will issue to the holder one share of its Class B common stock in exchange for the payment of its par value. Each share of Silvercrest’s Class B common stock will be redeemed for its par value and cancelled by Silvercrest if the holder of the corresponding Class B unit exchanges or forfeits its Class B unit pursuant to the terms of the Second Amended and Restated Limited Partnership Agreement of SLP, the terms of the 2012 Equity Incentive Plan of Silvercrest, or otherwise.