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Course Details

Course Information
  • smart_display Format

    On-Demand

  • signal_cellular_alt Difficulty Level

  • work Practice Area

    Bankruptcy

Date & Time
  • event Date

    Wednesday, November 9, 2022

  • schedule Time

    1:00 p.m. ET./10:00 a.m. PT

  • timer Program Length

    90 minutes

Credit Information

  • This 90-minute webinar is eligible in most states for 1.5 CLE credits.

$297.00
CLE
ALL

This CLE webinar is about employee incentive plans (KEIPs), employee retention plans (KERPs), and other executive compensation payments before, during, or after Chapter 11 bankruptcies. The panel will discuss the thin line between Bankruptcy Code Sections 503(c)(1) and (c)(3), how to create approvable programs, burdens of proof, and overcoming objections, taking examples from influential courts. The panel will also identify possible securities law issues for publicly traded companies.

Faculty

Brian Cumberland
Managing Director
Alvarez & Marsal Holdings, LLC

Mr. Cumberland leads the firm's Restructuring Compensation practice. With over 30 years of experience, Mr. Cumberland provides executive compensation advice to clients, development of compensation strategies, design of annual and long-term compensation arrangements, assessments of competitive compensation, and evaluation of tax and accounting ramifications of compensation arrangements. In advising on executive compensation matters, he regularly deals with issues related to stock options, restricted stock, non-qualified retirement plans, deferred compensation, critical employee incentive programs (KEIP) and essential employee retention programs (KERP), global compensation strategies, golden parachute rules, and the one-million deduction limitation.

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Scott D. Price
Partner
Kirkland & Ellis LLP

Mr. Price is a partner in the Firm’s Executive Compensation, Employment and Benefits Group. He has extensive experience handling a wide range of executive compensation matters in complex business transactions, including domestic and international mergers, leveraged buyouts, and other acquisitions. In addition, he has represented numerous high-profile executives and management teams in negotiating employment and incentive arrangements. His practice includes structuring and implementing management equity arrangements, deferred compensation, severance, and other executive programs, advising on securities, accounting, and tax law issues regarding executive compensation arrangements.

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Roxanne Tizravesh
Senior Counsel
Akin Gump Strauss Hauer & Feld LLP

Ms. Tizravesh is an experienced business litigator who helps clients solve problems and achieve their goals efficiently. Active in both state and federal court, she has advised on director and officer litigation, bankruptcy matters in the energy and other industries, handled internal and government investigations in the U.S. and Europe, and represented investors and financial services firms in a wide array of civil litigation matters.

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Description

Prefiling executive retention and other performance-based awards before or after bankruptcy are becoming the norm. Such payments may be subject to clawbacks under Bankruptcy Code Section 548. Corporate debtors may arrange a deal with their creditors behind the scenes to fend off a public fight before announcing a bonus plan to avoid these issues. They must understand the risks because the Bankruptcy Code provides creditors and other parties in interest with a potential and effective means of challenging restructuring compensation payments.

When seeking approval for KEIPs and KERPS, counsel must understand the applicable standards and burdens of proof under Bankruptcy Code Sections 503(c)(1) and (c)(3), as well as whether testimony and other evidence are sufficient to meet its burden. If proceeding under Section 503(c)(3), the proponent must show how the payment incentivized participation and are not hidden retention programs. Courts are unsettled regarding the meaning in Section 503(c)(3) of "justified by the facts and circumstances of the case."

Other stakeholders or U.S. Trustee objections may significantly modify and reduce these payments. Courts are required to consider many factors in approving incentive and retention payments. The structure of the plans, the treatment of each recipient, and platitudinous justifications are closely analyzed and require specific factual evidence to support them.

Listen as this experienced panel of bankruptcy attorneys and restructuring compensation professionals guides counsel through executive compensation in Chapter 11.

Outline

  1. Options for executive compensation before and after a bankruptcy filing
  2. The importance of timing
  3. KEIP vs. KERP
  4. Requirements for approval
  5. Common objections
  6. Evidentiary issues

Benefits

The panel will review these and other pivotal issues:

  • How do courts decide whether a KEIP target genuinely incentivizes insiders?
  • What does "justified by the facts and circumstances of the case" in 503(c)(3) mean?
  • Are bonuses justified when parties have negotiated a pre-filing sale?
  • How should debtors document each person's contribution to a reorganization effort?
  • How should counsel document the achievement of milestones, if needed?
  • What are the methods to determine reasonable compensation amounts?