Structuring Management Carve-Out Plans for Privately Held Corporations: Mechanics, Tax Obstacles and Optimization
Guidance for Employee Benefits Counsel on Private Company Liquidity Bonus Plan Compensation Arrangements
Note: CPE credit is not offered on this program
Recording of a 90-minute premium CLE webinar with Q&A
This CLE course will provide employee benefits counsel with guidance on the use of private company liquidity bonus plans to increase incentive and retain current employees. The panel will outline the mechanics of these compensatory arrangements, also known as carve-out plans, discuss strategic considerations and how to reconcile the competing interests of senior management and shareholders, and highlight the tax implications counsel must be aware of when structuring management carve-out plans.
- Why do private companies adopt carve-out plans?
- Maintain liquidity to retain employees
- Don't want to offer other equity alternatives (stock, options, RSUs)
- The flexibility of a corporation with the ability to provide comparable awards to LLC or partnership
- Binding right to an award or board discretion?
- Drafting alternatives for structuring carve-out plans
- Does the executive need to be employed on the payment date?
- What if there is a call option on a majority of the shares? Should that trigger?
- Post-closing merger conditions issues
- Tax impediments to goals
- Section 409A
- Section 280G
- Trends in carve-out plans in the startup scene
The panel will review these and other key issues:
- Consequences of a Section 409A violation and tips on bypassing or complying with 409A
- Carve-out plan alternatives, including phantom units tied to share value and percentage of net consideration
- Options for cleansing golden parachutes subject to Section 280G
- Carve-out payments and escrow/earnout issues
Elizabeth A. Gartland
Fenwick & West
Ms. Gartland focuses her practice on compensation and employee benefits matters for public and private companies that... | Read More
Ms. Gartland focuses her practice on compensation and employee benefits matters for public and private companies that arise in connection with corporate governance, mergers and acquisitions, initial public offerings and compensation design. She also advises clients regarding structuring their compensation arrangements, including compliance with Section 409A, Section 280G and other related tax and securities laws. Prior to rejoining Fenwick & West, Ms. Gartland was a member of the legal team at Adobe Systems Inc.Close
Fenwick & West
Mr. Mort focuses his practice on representation of public and private technology and life sciences companies in a wide... | Read More
Mr. Mort focuses his practice on representation of public and private technology and life sciences companies in a wide variety of corporate transactions. He advises on the issues that regularly arise with equity plans, executive compensation agreements and other employment benefit arrangements when clients are involved in mergers, acquisitions, public securities offerings, onboarding and terminations.Close