Option backdating illegal

23-May-2017 21:15

For example, there may have been a transfer of trade from one group company to another on a particular date.

As from that date, customers may have been invoiced by the transferee, employees may have been paid by the transferee, and accounting entries may have been made to reflect the purchase price payable for the assets.

Secondly, the transfer may trigger liabilities, such as where the relevant group companies participated in a defined benefit pension scheme.

Even though the transaction may have already happened in substance, it’s important to find out what the other legal consequences may be, so that steps can be taken to mitigate the risks.

In the context of corporate governance, the illegal practice of setting the date of options awarded as part of executive compensation to a period when the stock price was very low (rather than setting the date of the options on the date the award was made).

The act of dating a document before the date it was actually signed.

The practice of allowing a mutual fund shareholder to use previous purchases of the fund's shares so as to qualify for reduced commission charges on subsequent purchases.

Backdating is used when a fund offers declining proportional sales charges on larger purchases.

The transaction should be ratified by minutes or resolutions of the participating entities.

There are some cases where this approach is not possible.

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