BEST PRACTICES:
Learn the golden parachute payments as early as possible and prepare for how they might apply upon a future sale of your company.
Work with counsel to strategize how to mitigate or avoid future 280G liability. You may be able to make adjustments to salaries and other compensation arrangements to either bump up the base amounts of disqualified individuals who you expect will receive parachute payments or fit within various exceptions to the 280G rules. Once the deal process has begun, keep potential 280G implications top of my mind from the beginning and work with counsel to conduct a 280G analysis. This will require your deal team to pull a lot of information related to historical compensation, potential parachute payments, your capitalization table, and more. The buyer will likely request this information as well in order to conduct their own analysis (which will likely use more conservative assumptions, so you’ll want to have the information necessary to support pushing back on that, if desired). If you qualify for the shareholder approval exception, be prepared for this process to take some time and likely involve pushback from disqualified individuals and other uncomfortable (or even contentions) scenarios. Note that this process must be completed before the closing of the transaction in order for the exception to apply.
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