Legality of backdating

13-Jan-2017 12:33

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Perhaps the highest profile of these cases was the SEC’s investigation of Apple Inc., its former general counsel and its iconic CEO, Steve Jobs.

The media’s coverage of the stock option scandals caused the public to strongly associate backdating with corporate malfeasance.

The firm practices civil and business law, including extensive work in the auto and aviation industries.

16, 2009 – In recent years, the business media have frequently reported on companies who “backdated” executives’ stock option grants to dates when the stock price was low.

The challenge for the business lawyer is determining when backdating is legitimate and when it is not.

Misrepresentation versus memorialization Whether backdating a document is appropriate depends on the backdating’s “purpose and effect.” Backdating to perpetrate a fraud is obviously unethical and illegal.

31, 2009, but do not execute a contract formalizing their agreement until Jan.3, 2010, the contract may be dated as of Dec. This is simply the accurate memorialization of a past event, something that is essential to legal practice.

Another example of backdating that memorializes is drafting and executing records of action of a corporation’s board of directors after the board has adopted resolutions or taken other action.

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Perhaps the most fraudulent form of impermissible backdating is documenting and dating an act that never occurred. Additionally, backdating is impermissible when the backdated document describes an act that actually occurred, but at a date subsequent to the date of the document, in order to secure benefits to which a party is not entitled.However, backdating to memorialize a prior act or event is a legitimate and necessary practice.Past acts and events can – and often must – be documented.Typically, this ensured the options were already “in the money” when the company granted them to employees.

The practice is of dubious legality, and its widespread use led the SEC to scrutinize hundreds of companies.The “novation” theory is distinct from the conflicting legal theory that views the first contract as having been rescinded and the “second” contract as a completely new contract requiring that it be dated as of the date the rewritten contract was signed. However, the dealer appealed to the Appellate Court, arguing that the trial Court had waited too long to change its mind and was legally obligated to enter its initial decision in favor of the dealership.The Appellate Court agreed, and ordered the Trial Judge to reinstate his initial decision in favor of the dealership.Unfortunately, it is sometimes difficult to determine whether backdating misrepresents or memorializes.

Legal Help for Insurance Law - Auto Insurance Legality of Backdating Auto Insurance. California On March 5th I switched auto insurance companies from State Farm to.… continue reading »

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