About the Course
Introduction
This CLE webinar will provide executive compensation counsel with guidance on the use of private company phantom plans to incentivize and retain current employees. The panel will outline the mechanics of these compensatory arrangements, discuss strategic considerations and how to reconcile the competing interests of senior management and shareholders, and highlight the tax implications counsel must be aware of when structuring phantom plans.
Description
Private company phantom incentive plans--also referred to as phantom stock or phantom bonus plans--are a type of instrument used to incentivize current employees by committing to make a payout on a later date or a change in control. Unlike typical equity instruments, which may be settled in shares that may vote and may (under some circumstances) be subject to taxation at capital gains rates, phantom plans are compensatory contracts that allow senior managers to share in the value they build in a company.
Structuring these arrangements raises many strategic questions. Should the phantom plan track company stock or another metric? Should the awards participate in any escrow or earnout? Should people be forced to be present at the change in control in order to receive a payout? Should the awards be forfeited under certain conditions? What should happen to the forfeited amounts? How can the plan be amended?
A phantom incentive plan is usually a tense negotiation of competing interests to encourage retention for senior management and maximize value for shareholders. This presentation will highlight the considerations that affect plan design and discuss common trends.
To further complicate matters, phantom plans are subject to a unique and complicated set of tax rules. This discussion will highlight common constraints on phantom plans in the U.S. tax regime, including Section 409A (regulating deferred compensation arrangements) and 280G (regulating golden parachute payments).
Listen as our experienced panel discusses the use of private company phantom plans to incentivize and retain current employees. The panel will outline the mechanics of these plans, discuss strategic considerations and how to reconcile the competing interests of senior management and shareholders, and highlight the tax implications counsel must be aware of when structuring phantom plans.
Presented By
Mr. Gokhmark’s practice focuses on providing executive compensation and employee benefits advice to public and private companies in the context of mergers and acquisitions, IPOs and other corporate events. He represents companies, boards of directors, independent and compensation committees, executive management teams and members of management on executive compensation matters that arise in the ordinary course of business and in connection with extraordinary events, including leadership transitions.
Mr. Wiseman regularly represents both public and private companies in a range of industries and is frequently called upon to advise boards of directors, compensation committees, senior management teams and members of management on compensation matters arising both in the ordinary course of business and with respect to extraordinary events, including leadership transitions. He is recognized as an up-and-coming leader and adviser in the financial services and fintech industries as a result of his extensive experience working on executive compensation and corporate governance matters. Mr. Wiseman frequently assists clients, including financial institutions, financial sponsors, founders and senior executives, in navigating complex and overlapping regulatory regimes and structuring sophisticated incentive arrangements. He provides tax planning advice with respect to profits interests and other partnership compensatory instruments, as well as Sections 409A, 162(m) and 280G of the Internal Revenue Code. A significant portion of his practice focuses on advice related to various federal regulatory regimes, including banking regulatory requirements, SEC rules and disclosure requirements governing executive compensation, securities registration and exemption requirements, and compliance with NYSE and Nasdaq listing standards. Mr. Wiseman has authored or co-authored articles in various publications related to executive compensation in the context of mergers and acquisitions, SEC reporting and banking regulatory rules governing incentive compensation, in addition to regularly speaking at conferences and seminars on these topics.
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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Date + Time
- event
Wednesday, June 18, 2025
- schedule
1:00 p.m. ET./10:00 a.m. PT
I. What is a Phantom Plan?
II. Why do Private Companies Adopt Phantom Plans?
III. Tax, Legal and Regulatory Considerations
A. Tax Treatment of Phantom Awards
B. Implications of Section 409A
C. Section 280G
IV. Plan & Award Mechanics
A. Form of Award
B. Adoption/Implementation of Plan
C. Grant & Vesting Mechanics
D. Payments Mechanics
The panel will review these and other key issues:
- Consequences of a Section 409A violation and tips on bypassing or complying with 409A
- Phantom plan alternatives, including phantom units tied to share value and percentage of net consideration
- Options for cleansing parachute payments subject to Section 280G
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