by John Ludlum Incentive Stock Options (“ISOs”) have a somewhat legendary status as equity incentives for technology and other early-stage companies. It is true that ISOs are one of two types of equity awards that can achieve...more
If you ever want to see a benefits lawyer get nervous, start talking about corporate intent. Yes, the company intended to grant options at an earlier and lower exercise price, and yes it may have made promises to the...more
Changes and trends in private company equity incentive plan terms over time -
A client who remembered equity plans from Silicon Valley in years past asked about what has changed in private company equity plans over time....more
It is common for employees and executives of technology companies to receive a significant portion of their compensation in equity. For executives, the equity often represents the majority of the financial upside of the...more
We have referenced Code Section 280G and the golden parachute rules recently on this blog, and we have also discussed LLC equity incentives. It can be fun to see how these concepts play out in a practical way in executive...more
In these times of high M&A activity, we see a lot of questions about Code Section 280G (“Section 280G”) which we discussed generally on this blog a few weeks ago. One fine point issue that comes up relates to whether Section...more
In a former life, I studied how competent professionals made what turned out to be wrong and sometimes deadly decisions. Often under the general category of “loss of situational awareness,” we had sanitized terms like “target...more
On a frequent question of how to structure incentives for LLC entities, we find that many of our clients decide to use profits interests for only a few key employees (making them partners subject to partnership taxation) and...more
Most private companies are now well aware that the valuation methods under Code Section 409A are for the purpose of granting Section 409A exempt “stock rights” which include employee stock options with a requirement, among...more
On April 14, 2021, the Employee Benefits Security Administration (“EBSA”) published guidance for plan sponsors, plan fiduciaries, record-keepers, and plan participants on best practices for maintaining cybersecurity. This is...more
We often encounter questions relating to the fair market value of a private company for granting stock options where the company has experienced an event, such as receiving a signed term sheet, which almost certainly will...more
There are a number of well-known stories of equity compensation, often focusing on the tax outcomes for awards where fortunate optionees did everything right. Some of these stories are actual outcomes, such as when ISOs that...more
Noting that there has been an increase in computer crime in connection with the economic disruption caused by COVID-19, companies should remember that retirement plan accounts are attractive targets for cyber thieves because...more
We are aware of several business studies that conclude that a high percentage, between 70-90%, of corporate acquisitions fail to meet their business objectives. When looking at why the time, effort, and expense invested in a...more
Even in the current economic and business disruptions caused by COVID-19, we are still seeing key executive hiring go forward. Executive employment agreements contain many tax terms, and while some are largely boilerplate...more
This is the 3rd major economic upheaval we have had in 20 some years, and once again we have a climate of widespread business uncertainty, employment instability, and economic suffering. Most of our clients have experienced...more
Underwater Employee Stock Options An unprecedented period of price volatility and general decline for many companies has left employee stock options with exercise prices below the current fair market value of the underlying...more
As we enjoy the Silicon Slopes Tech Summit 2020, it has been great to catch up with executives, investors, and entrepreneurs working to build the next technology ideas into successful companies. It is interesting to think...more
Many private companies assume that if valid federal and state exemptions from registration are available for private company securities that there is little risk of problems with the Securities Exchange Commission (SEC). ...more
12/19/2019
/ Business Valuations ,
Corporate Governance ,
Enforcement Actions ,
ESOP ,
Fraud ,
Issuer Exemption ,
Misrepresentation ,
Privately Held Corporations ,
Securities and Exchange Commission (SEC) ,
Securities Exchange Act ,
Securities Fraud ,
Stock Repurchases
We are often asked by our private company clients about making changes to outstanding stock options. In some cases, changes to the number of shares subject to an option are needed, or to the vesting schedule, or to the...more
Companies implement bonus plans to meet a variety of business objectives: retention, specific company business goals, change of control, and others. In designing bonus plans, there are a variety of legal fields that must be...more
Internal Revenue Code Section 119 (Code Section 119) allows employees to exclude from income the value of any meals furnished by or on behalf of their employer if the meals are furnished on the employer’s business premises...more
The Internal Revenue Service issued guidance on a tax law change that permits the deferral of income tax on equity awards in private companies. Section 83(i) of the Internal Revenue Code was included in the 2017 Tax Cuts and...more
Beyond cutting individual tax rates temporarily and slashing corporate taxes to 21 percent permanently, the Tax Cuts and Jobs Act includes new options in the taxation of certain employee equity awards....more