Back dating options illegal

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Documenting a transaction which has not yet happened In other cases, it may not be possible to say that the relevant transaction has already taken place – but you may still want to achieve a ‘backdated’ effect.In this situation, it may be possible to put in place an agreement now, with a historic ‘effective date’.This is one of the most common issues which comes up in the context of group reorganisations or intercompany agreements. Giving a document a date which is earlier than the date when it was actually signed, would almost certainly constitute fraud.Although it may have been intended to put in place a new arrangement by a particular date – often a year end – that date may now have passed. Obviously the ideal position is to put in place the legal documents in advance. Well, it depends on what was transferred, and whether it can be said that the relevant transaction has already happened.The agreement could specify, amongst other things, that costs and revenue would be apportioned by reference to the historic effective date, with adjusting payments being made accordingly.This type of arrangement would not bind third parties, but it may be effective from an accounting and tax perspective depending on the length of time which has elapsed since the intended historic effective date.Documenting a transaction which has already happened One possible scenario is that the relevant transaction has already happened, but just hasn’t been documented yet.For example, there may have been a transfer of trade from one group company to another on a particular date.

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So any attempt to rely on the reduction before registration would be ineffective.

Even though the transaction may have already happened in substance, it’s important to find out what the other legal consequences may be, so that steps can be taken to mitigate the risks.

These two general areas mean that some legal due diligence should be carried out to identify and address areas for corrective action.

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