Backdating legal

Now, two months later you prepared a contract that is ready to be signed if you can just figure out the right date. It’s harder than you think to put in a prior date and have it look authentic.

In general, “backdating” should be avoided, whether we are talking contracts or old flames. Yes, I know businesses do it all the time but that doesn’t mean it is good business practice; and in many cases it may be considered fraud or misrepresentation. For example, the first payment is due upon signing two months ago…except the check was never written or deposited in a bank. So, there is no intent to defraud or mislead or misrepresent the true nature of the agreement.

backdating legal-72

If you are thinking of rekindling your relationship with an old flame, you came to the wrong place.

What “backdating” is about is signing an agreement today with the intent that it be effective as of a prior date.

Last October I interviewed Scott Mc Nealy, CEO of Sun Microsystems (SUNW), for a different story, and I brought up the subject of options backdating.

I thought his comment was telling: “When I sign a document and it has a date thing there? I didn’t even go to law school, and I figured out that that’s probably the most appropriate thing.” By the way, even in the unlikely event that someone backdates options and accounts for them properly–i.e., treats them as in-the-money options–he would still almost always be violating the terms of the stock option plan which has been approved by shareholders.

For example, if the agreement requires the assignment of intellectual property rights (past, present and future), why not just use The fix may be different for different agreements.

If it is a promissory note, compute the accrued interest prior to signing the note and include it in the principal amount of the note.Typically, this is done by stating at the beginning of the contract that However, if there are intellectual property rights, confidentiality obligations or other pre-existing obligations, you may have a problem because any rights arising prior to signing the contract would be lost. How do you hold someone responsible for doing something before they knew it was an obligation? Sometimes, the best solution is just to fix the problem.Read each paragraph and consider what it means if you sign the agreement today.Those plans almost always require that the options be granted at fair market value on the date of the grant.And if there is a stock option plan that doesn’t contain that language, the backdater would still have to make disclosures in a half-dozen publicly filed documents about what he was doing. Something like: “Please note that when we grant options, we sometimes pretend that we grant them on certain dates when in fact we grant them weeks later. We just do this to amuse ourselves, because we account for them properly using the real dates.” Could the next person who writes in to remind me that backdating isn’t illegal do me a favor?Sure the accounting rules are arcane and most people don’t know them.

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