Drafting and executing a document after an event occurs, but in a manner that accurately reflects the date on which the event transpired, is a permissible form of backdating.
This is backdating that memorializes, something the United States Court of Appeals for the Seventh Circuit has recognized as a legitimate practice.
Courts have certainly been willing to hold that a contract exists before a written contract has been finalized. But I’d still use as the date for a written contract the date it was signed.
It’s likely that the written contract addresses many more issues than were covered by the oral agreement, making the written contract different from the oral agreement.
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.
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.
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.
Additionally, where the backdating of an agreement affects the taxes that are imposed (or not imposed) on one of the contracting parties, courts will generally only respect the backdating provisions as between the contracting parties.