Is option backdating illegal

07-Jul-2014 06:29

This is not an agreement that could have been made orally.However, even if it is an agreement that could have been made orally the lawyer preparing the agreement has no way of knowing whether that is actually the case and that the agreement to be fully documented by him is the one that was reached at the earlier date.What confirmation of the earlier agreement did the client or the company for which the client (and lawyer) works provide?Is the client a longstanding one who has always acted properly in the past? These are questions he will probably be asked by the judge or regulator if things go wrong and to which he will need convincing answers.Is there an obligation on the lawyer to make at least reasonable endeavour’s to confirm that he is being told the truth?Unfortunately, there is no simple or straight forward answer to this and it comes down to how comfortable the lawyer will be defending his position in agreeing to backdate the document if his judgment was wrong and the authorities challenge the document, possibly in a criminal complaint against the client.There are some ways in which the lawyer can give himself some protection in agreeing to such a request but they are not foolproof.

Does he need to check to see whether that was actually the case or can he take an ostrich-like position and put his head in the sand and not ask any questions?The best way to achieve this is to state openly in the document that it is recording an earlier oral agreement made on, and so is with effect from, a particular date and then date it the actual date it was signed.

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