We tie this to the favorable Canadian tax treatment of executive options relative to their treatment in the United States. The comparison suggests that the personal tax regime may have been one of the factors which impacted the desire to receive backdated options in lieu of other forms of compensation in Canada but not so in the United States. Prior to 2003, the long-term capital gains rate was generally 20%. 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.Furthermore, giving the written contract its own date simply reflects the reality of how the contract process unfolded, and it’s always good to have contracts track reality.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.A court will generally not enforce the backdating provisions as between a taxpayer and the applicable tax enforcement agency (such as the Canada Revenue Agency).
The Law Society of Upper Canada Ontario Discipline Committee determined that backdating the employment contracts was for the purpose of misleading a third party, and suspended the solicitor for a period of twelve months.Also see: 5 things to know about the Panama Papers In a written response to questions from ICIJ and its media partners, the firm said that backdating documents “is a well-founded and accepted practice” that is “common in our industry and its aim is not to cover up or hide unlawful acts.” Erik Lie, a finance professor at the University of Iowa, published an initial study in 2005 and then another in July 2006 that said more than 2,000 companies had used options backdating between 19 to reward senior executives.Backdating allowed executives to choose a past date when the market price was particularly low, thereby inflating the value of the options.The process was illegal in many cases because documents were forged, the options were not properly accounted for, and the backdating was not clearly communicated to the company’s shareholders.Important note for site admins: If you are the administrator of this website note that your access has been limited because you broke one of the Wordfence blocking rules.Although backdating is generally permissible under the common law, a court will not give effect to backdating where the parties backdated the contract to mislead a third party.