For those instances where a document is intended to take effect retroactively, you should: This entry was posted on March 6, 2009 at am and is filed under Uncategorized.You can follow any responses to this entry through the RSS 2.0 feed.

stock backdating illegal-78

Lawyers who were trained in commonwealth jurisdictions may have an ingrained concept that backdating a document is generally improper, if not illegal.

This is reflected in the Linklaters article Execution of Documents: Five Common Questions Answered, which offers the following advice for in-house lawyers: “(i) contracts may only be backdated, absent fraud, in circumstances where an original form has been lost or where terms have been fully agreed but signatures have been left to a later date and (ii) deeds may never be backdated.” Unfortunately, the article offers scant authority, and a search on Google reveals little else on the subject from the commonwealth world.

Such relation back or forward contravenes no principle of law and is determined by the intent of the parties as deduced from the instrument itself.” As a practical matter, the proper date to put on an agreement is something that corporate counsel is likely to have to make a judgment call on quite often.

This is because documents take time to draft, negotiate and execute.

The commonwealth-trained (and more prudent) approach would be to insert the date only when the last party has signed and to use a date no earler than the date of that last signature.

This should cover the majority of cases that come across corporate counsel’s desk.

1990) held that: “Illinois courts have, in the past, permitted the “relation back” theory of contract effectiveness: that is, contractual terms may be effective for a period before the contract is executed, so long as such coverage is clear from the face of the contract: In the law of contracts, it is elementary that ordinarily a contract speaks from the day of its date, regardless of when it was executed and delivered.

It is of common occurrence in connection with deeds, leases and other contracts that, while they are not in effect at all and have no legal existence until delivered, yet, in respect to the date of delivery, they, in point of commencement, relate back or commence in the future.

The act of options backdating has become much more difficult as companies are now required to report the granting of options to the SEC within two business days.