In this article, the authors explain that treatment of employee equity awards in the context of corporate transactions can raise complex issues involving business considerations and multiple areas of law. The authors conclude that careful structuring is required in order to ensure legal compliance and the achievement of the parties’ intended business goals.
Treatment of equity awards in the context of any acquisition involves careful diligence and structuring in order to ensure the achievement of the parties’ intended goals and to avoid adverse tax consequence and noncompliance with various laws. Parties have to carefully consider tax and securities law consequences, in addition to business goals (such as employee retention and morale) and contractual commitments. This article addresses some of the common issues that arise in respect of employee equity awards in the context of corporate transactions. Given the complexity of equity awards and the related issues, careful consideration must be given to all potential issues on a transaction-by-transaction basis.
This article was first published in Benefits Law Journal, Autumn 2022, Volume 35, Number 3, pages 26–38.
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