Start Option backdating illegal

Option backdating illegal

It’s not unusual for parties to a contract to want the written agreement to cover a period before it’s actually signed.

However, where a contract is ambiguous with respect to its effective date, the absence of an explanation for a retroactive effective date, and evidence that the parties had not agreed to the material terms of their contract as of the purported retroactive effective date, are relevant considerations in resolving the ambiguity.

We cannot conclude, therefore, that in resolving the inconsistency between the FDIC/Weatherford Agreement and the Termination of Participation Agreements, the trial court erroneously relied on these uncontested facts to find “a lack of mutual assent” with respect to a November 7, 2008 effective date.

What values and norms should guide the board of directors in protecting the shareholders’ interests?

This is especially true in the context of a complex deal that includes multiple documents and when the retroactive date is several months in the past.

For a shorter piece with a few practical tips see Backdating – it’s illegal isn’t it?

Setting aside such issues, avoiding unwanted side effects of backdating contracts can be tricky, especially when the purported effective date of an agreement is several months before the date it was actually signed, as can be seen in involves the ownership of a promissory note that was made to a bank in connection with a loan.

FH Partners argued on appeal that, although the FDIC didn’t own the loan on December 16, 2008, the FDIC’s backdated transaction with Weatherford remedied the problem retroactively.