There are certain situations, however, when backdating is acceptable; however, the parties involved must agree to it.
There was a spate of backdating stock options in the 2000s, mostly at technology firms that rely heavily on stock options for executive compensation, but also at some companies not in the tech sector.
Whenever I write about backdating, many people write in to tell me that backdating’s not illegal; you just have to account for it correctly.
For example, if parties clearly reach an agreement on Dec.
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.
She’s saying that shareholders will naively think that the options were really granted on January 2, leaving them suspicious of springloading.
It goes without saying that they also won’t realize that, in reality, it’s all being done a month later.
The backdating scheme involved moving an effective date for the exercise of stock options from when the options were 'out of the money' to a date that made the options 'in the money' in order to allow certain executives to exercise their options profitably.
Companies such as Verisign, F5 Networks, Brocade Communications, Intuit and Mc Afee - as well as Home Depot, Michael's Stores and United Health Group, to name a few - all engaged in this fraudulent activity to varying degrees and were forced to pay fines and penalties and conduct time-consuming and expensive restatements of their books.However, it is impermissible where the parties backdate either to unconscionably interfere with the rights of third parties (including the government's right to tax such parties) or where it contravenes applicable rules or legislation.With a pair of newly introduced tools to encourage corporate social responsibility, the federal government is seeking to expand its reach when it comes to controlling the way Canadian businesses operate abroad.It is common for two parties, particularly in the commercial context, to enter into a contract at one time, but agree to have the contract come into effect at an earlier time. Courts respect the parties' decision to backdate since giving effect to backdating provisions respects the parties' intentions as well as their freedom of contract., 1968 (the date the contract was delivered to the insured).The Court considered the construction of the whole policy and held that the exclusion clause took effect on the backdated date chosen by the parties.And to say it’s up to the bean-counters to catch this situation is silly, because the whole reason you’re using phony dates is so that the bean-counters won’t know what you really did.