Strategies for Executive Compensation: Design and Tax Issues for a ...

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Canadian Taxation • Clawback in current year poses no difficulty • Clawback in later year creates problems due to section 8 of Income Tax Act (Canada) 13 Potential Tax Relief for Later Year Clawbacks • Filing an Amended Tax Return – Armstrong - CRA discretion 14 Potential Tax Relief for Later Year Clawbacks (cont’d) • Mistake – “If the parties base their contract on a fundamental error about the assumptions supporting their agreement, and neither party agrees to bear the risk of the assumption turning out be false, the contract can be held void on the basis of the doctrine of common-law mistake.” – procedural and jurisdictional hurdles - Fradette 15 5
Potential Tax Relief for Later Year Clawbacks (cont’d) • Remission – “The Governor in Council may, on the recommendation of the appropriate Minister, remit any tax or penalty, including any interest paid or payable thereon, where the Governor in Council considers that the collection of the tax or the enforcement of the penalty is unreasonable or unjust or that it is otherwise in the public interest to remit the tax or penalty” – no public record of such a remission order having ever been granted in the case of a clawback 16 Potential Tax Relief for Later Year Clawbacks (cont’d) • Unjust enrichment – enrichment without juristic reason 17 Potential Tax Relief for Later Year Clawbacks (cont’d) • Rectification – “In order for a party to succeed on a plea of rectification, he must satisfy the Court that the parties, all of them, were in complete agreement as to the terms of their contract but wrote them down incorrectly. It is not a question of the Court being asked to speculate about the parties’ intention, but rather to make an inquiry to determine whether the written agreement properly records the intention of the parties as clearly revealed in their prior agreement.” 18 6
Page 1 and 2: Strategies for Executive Compensati
Page 3 and 4: April 10, 2012 Strategies for Execu
Page 5 and 6: Incentive And Stock Compensation Ar
Page 7 and 8: Types of Private Equity Transaction
Page 9 and 10: Participation of Target/Portfolio C
Page 11 and 12: Exit Strategies and Investment Hori
Page 13 and 14: Key Design Considerations and Commo
Page 15 and 16: Stock Options - Rules for Canadian-
Page 17 and 18: Stock Options - Rules for Canadian-
Page 19 and 20: Share Purchase Loans • Management
Page 21 and 22: Cash-Based Long-Term Incentive Plan
Page 23 and 24: Cash-Based Long-Term Incentive Plan
Page 25 and 26: Non-Portfolio Company Incentives (c
Page 27 and 28: Acquirer (Buyer) Priorities in a Co
Page 29 and 30: Program Treatment - Equity Compensa
Page 31 and 32: Dollar Amount Converted to RSUs/DSU
Page 33 and 34: U.S. Statutory Clawbacks (cont’d)
Page 35: Type and Relative Prevalence of Cla
Page 39 and 40: Conclusion • Clawbacks in Canada
Page 41 and 42: Long Term Incentive Plan Clawbacks:
Page 43 and 44: - 3 - are subject to recoupment. It
Page 45 and 46: - 5 - U.S., a wide range of incenti
Page 47 and 48: - 7 - review our policy to assure t
Page 49 and 50: - 9 - Cash and Earnings Bonus Unit
Page 51 and 52: - 11 - underway or contemplated at
Page 53 and 54: - 13 - operate, the terminated part
Page 55 and 56: - 15 - use of the provision where a
Page 57 and 58: - 17 - interest paid or payable the
Page 59 and 60: - 19 - right is to postpone tax pay
Page 61 and 62: - 21 - taxpayer under subsection 7(
Page 63 and 64: Bill Sutherland Bill is a Senior Co

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