Pitfalls in implementing employee incentive plans for executives in bankruptcy cases

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Pitfalls in creating and implementing key employee incentive plans for executives in bankruptcy cases - .PDF file.

To successfully reorganize in Chapter 11, a bankrupt company may need to retain key employees who understand the company’s business and who can design and implement the company’s reorganisation plan. Retaining and properly incentivising these employees during a Chapter 11 case can be challenging for a number of reasons. For example, it may be difficult to replicate these employees’ prepetition compensation during the Chapter 11 case because a significant part of their compensation may have been in the form of stock options (which are likely worthless in light of the bankruptcy proceedings) and performance bonuses based on metrics that are no longer achievable.

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