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Chapter 11 Treatment of Executive Compensation and Bonuses

Structuring Approvable KEIPs and KERPs, Surviving Objections

Recording of a 90-minute CLE video webinar with Q&A

This program is included with the Strafford CLE Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Conducted on Wednesday, November 9, 2022

Recorded event now available

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This CLE webinar is about employee incentive plans (KEIPs), employee retention plans (KERPs), and other executive compensation payments before, during, or after Chapter 11 bankruptcies. The panel will discuss the thin line between Bankruptcy Code Sections 503(c)(1) and (c)(3), how to create approvable programs, burdens of proof, and overcoming objections, taking examples from influential courts. The panel will also identify possible securities law issues for publicly traded companies.


Prefiling executive retention and other performance-based awards before or after bankruptcy are becoming the norm. Such payments may be subject to clawbacks under Bankruptcy Code Section 548. Corporate debtors may arrange a deal with their creditors behind the scenes to fend off a public fight before announcing a bonus plan to avoid these issues. They must understand the risks because the Bankruptcy Code provides creditors and other parties in interest with a potential and effective means of challenging restructuring compensation payments.

When seeking approval for KEIPs and KERPS, counsel must understand the applicable standards and burdens of proof under Bankruptcy Code Sections 503(c)(1) and (c)(3), as well as whether testimony and other evidence are sufficient to meet its burden. If proceeding under Section 503(c)(3), the proponent must show how the payment incentivized participation and are not hidden retention programs. Courts are unsettled regarding the meaning in Section 503(c)(3) of "justified by the facts and circumstances of the case."

Other stakeholders or U.S. Trustee objections may significantly modify and reduce these payments. Courts are required to consider many factors in approving incentive and retention payments. The structure of the plans, the treatment of each recipient, and platitudinous justifications are closely analyzed and require specific factual evidence to support them.

Listen as this experienced panel of bankruptcy attorneys and restructuring compensation professionals guides counsel through executive compensation in Chapter 11.



  1. Options for executive compensation before and after a bankruptcy filing
  2. The importance of timing
  3. KEIP vs. KERP
  4. Requirements for approval
  5. Common objections
  6. Evidentiary issues


The panel will review these and other pivotal issues:

  • How do courts decide whether a KEIP target genuinely incentivizes insiders?
  • What does "justified by the facts and circumstances of the case" in 503(c)(3) mean?
  • Are bonuses justified when parties have negotiated a pre-filing sale?
  • How should debtors document each person's contribution to a reorganization effort?
  • How should counsel document the achievement of milestones, if needed?
  • What are the methods to determine reasonable compensation amounts?


Cumberland, Brian
Brian Cumberland

Managing Director
Alvarez & Marsal

Mr. Cumberland leads the firm's Restructuring Compensation practice. With over 30 years of...  |  Read More

Price, Scott
Scott D. Price, PC

Kirkland & Ellis

Mr. Price is a partner in the Firm’s Executive Compensation, Employment and Benefits Group. He has...  |  Read More

Tizravesh, Roxanne
Roxanne Tizravesh

Senior Counsel
Akin Gump Strauss Hauer & Feld

Ms. Tizravesh is an experienced business litigator who helps clients solve problems and achieve their goals...  |  Read More

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