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Sinead Kelly

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Public companies seeking shareholder approval of a new or amended equity plan on or after February 1, 2019 should consider some key updates by Institutional Shareholder Services (“ISS”) to its Equity Compensation Plans FAQs. Although the updates leave ISS’s general equity plan scorecard (“EPSC”) methodology framework intact, there are some noteworthy changes: CIC Vesting Factor. The change in control (CIC) vesting factor has been revised to provide EPSC points based on whether the company discloses the vesting treatment…

On December 7th, the IRS issued Notice 2018-97 to provide initial guidance on the new private company income inclusion deferral regime enacted under Code Section 83(i) as part of the 2017 Tax Cuts and Jobs Act (“Section 83(i)”). Under the deferral regime, eligible employees of eligible privately-held companies may elect to defer payment of federal income taxes due on exercise of stock options or settlement of restricted stock units (“RSUs”) for up to five years…

Institutional Shareholder Services (ISS) on November 21, 2018 issued “preliminary” FAQs addressing a few, but not insignificant, changes to its compensation policies for 2019.  Unfortunately, these FAQs did not provide much-anticipated guidance on performance awards, following the Tax Cuts and Jobs Act’s elimination of the “qualified performance-based compensation” exception to the general deductibility disallowance under Section 162(m) of the Internal Revenue Code for compensation exceeding $1 million payable to “covered employees” of publicly traded companies. …

On September 24, 2018, the IRS issued Notice 2018-71 (Notice) on the temporary employer tax credit introduced by the Tax Cuts and Jobs Act for wages paid to Qualifying Employees while on covered family or medical leave under new Section 45S of the Internal Revenue Code (Code). In brief: Where the requirements of the Notice are met, the new credit may be claimed during tax years 2018 and 2019 for paid family and medical leave…

Proxy advisors (e.g., Institutional Shareholder Services (“ISS”) and Glass, Lewis & Co (“Glass Lewis”)) have played a substantial role in the design of executive compensation for many years.   This has been due to the strong reliance of institutional investors (as well as investment advisors) on the proxy voting recommendations of firms such as ISS and Glass Lewis.  Some commentators have viewed the proxy advisors as being quasi-regulators without any formal oversight of their potential conflicts…

Now that we have had a couple of weeks to digest the IRS’s guidance in Notice 2018-68 on the Tax Cuts and Jobs Act’s (TCJA’s) amendments to Code Section 162(m), it’s a good time to take a closer look at the “grandfathering” rule. As a reminder, the TCJA (i) eliminated the “performance-based compensation” exception to Section 162(m)’s $1 million limit on the deductibility of covered employee compensation, (ii) expanded and made permanent the group of…

Last week, the IRS issued Notice 2018-68 containing initial guidance on the amendments to section 162(m) made by the Tax Cuts and Jobs Act (“TCJA”), including the transitional relief for written binding contracts. On balance, the guidance is not particularly favorable to taxpayers, as it takes a narrow view of the grandfathering relief for arrangements in effect under prior law, particularly for arrangements with negative discretion, and a broad view of the new group of…

Amendment to Rule 701’s Enhanced Disclosure Threshold On July 18, 2018, the Securities and Exchange Commission (SEC) amended Rule 701(e) of the Securities Act of 1933, increasing from $5 million to $10 million the amount of securities that issuers may sell in reliance on Rule 701 during a 12-month period without triggering enhanced disclosure requirements. The amendment will become effective imminently upon its publication in the Federal Register. Background and Application of Rule 701’s Enhanced…

On May 11th, the staff of the SEC’s Division of Corporation Finance issued 45 Compliance and Disclosure Interpretations (CDIs), replacing previously published telephone interpretations on proxy rules and Schedule 14A. Most of the updates are non-substantive, as noted by the SEC, and therefore the updates are primarily helpful for consolidating the relevant guidance in one place. Twelve of the CDIs relate to Item 10 of Schedule 14A, which sets forth the disclosure rules when a…

The Financial Accounting Standards Board (FASB) recently approved the decision to apply ASC 718 — the accounting treatment that applies to equity awards granted to employees (and non-employee directors) — to equity awards granted to consultants and other individuals who are not employees. Applying ASC 718 to Non-Employees Previously, ASC 505-50 applied to equity awards that were granted to non employees.  Under ASC 505-50, the vesting date — rather than the grant date — is…