One of the thornier issues which comes up in legal practice from time to time is the backdating of documents.
Indeed, with more than 80 companies being reviewed by the SEC for potential illegal backdating practices, and one academic study claiming that more than 2,000 companies have engaged in the practice, civil and criminal charges will probably mushroom in the next few months. The purpose of backdating is straightforward: it gives options holders an immediate paper gain, and a real gain once the option is exercised.In the US, however, there seems to be have been much more consideration of the issue (at least according to my Google search results).Despite recent controversies surrounding the backdating of executive stock options, the general attitude in the US is that backdating is not wrong (or right), per se.This article will try to unpick the various legal threads of when you can and cannot backdate documents, and what the consequences will be if you do.
The first and most important thing to note about the consequences of backdating a document is that it is potentially a criminal offence.Backdating is dating any document by a date earlier than the one on which the document was originally drawn up.Under most circumstances, backdating is seen as fraudulent and illegal, although there are some situations in which backdating can be used in a legal and beneficial way, such as backdating a claim for a past period.Courts have certainly been willing to hold that a contract exists before a written contract has been finalized. But I’d still use as the date for a written contract the date it was signed.