Backdating corporate documents for a corporation, don't kill yourself
There are several reasons for this difficulty, including that ambiguous law might govern the time of an event and relevant facts may be uncertain. Have a constitution or replaceable rules in place.
Don't kill yourself
Assess whether the backdating is intended to deceive or harm third parties including government and regulatory bodies. The event did not happen during the time period required for the benefit so an attempt is being made to pretend that it did. The challenge for the business lawyer is determining when backdating is legitimate and when it is not. This is never a good idea. Carefully assess each situation to ensure backdating is proper and that it is carried out in a thoughtful manner.
He also has no way of knowing whether the backdating will be scrutinized by a regulatory authority or even a Court. Because they can create uncertainty regarding the date of an agreement, both present challenges for a lawyer considering backdating a document. Unfortunately, it is sometimes difficult to determine whether backdating misrepresents or memorializes. To protect themselves, their firms and their clients, business law conduct invalidating assent attorneys should always be certain their backdating falls into the latter category. Backdating is not always the stuff of scandal.
Backdating, in this case, may be useful as the parties, who have already begun acting on the agreement, finish the final details of the written contract. With a bit of thought and investigation, is it often possible to achieve a result which gets close to the desired result and also lets you sleep at night.
For obvious reasons, any request to backdate a document for these reasons should be flatly turned down. For example, there may have been a transfer of trade from one group company to another on a particular date.
That the parties reached an agreement is usually clear. However, backdating to memorialize a prior act or event is a legitimate and necessary practice. Such relation back or forward contravenes no principle of law and is determined by the intent of the parties as deduced from the instrument itself.
Firstly, additional formalities may be needed to complete the legal transfer of assets or granting of rights. This is not an agreement that could have been made orally. This article is published courtesy of the September Business Law Section newsletter.
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. Only proceed if the answer is no. Well, it depends on what was transferred, and whether it can be said that the relevant transaction has already happened.
Section membership includes access to newsletters, email lists to facilitate information sharing, and other resources. As a matter of contract law, it is not always easy to determine when parties reached an agreement. For example, when a document memorializes an earlier event and is backdated to the date of the event, it may mislead a court to believe the document was actually executed on that date.
In addition to ambiguous law, a lawyer may also be faced with uncertain or unverifiable facts. What confirmation of the earlier agreement did the client or the company for which the client and lawyer works provide?
Obviously the ideal position is to put in place the legal documents in advance. Rather, it is the use of the backdated documents by the parties or their counsel that may violate the law. The answer to whether you can backdate a corporation is a straightforward no.
Two parties in a business contract who explicitly agree in writing that an effective date for the contract can be made at a date prior to the current one. You will also need to consider two other things from a legal perspective. If such confirmation is unavailable, the attorney must exercise sound discretion based on his or her knowledge and past experiences with the client. This is a fraud on the tax authorities, a criminal offence and is likely to get the lawyer who prepared the document disciplined by his regulator and possibly also charged as a co-conspirator.
If, after making a thorough legal and factual evaluation, it is uncertain when or if an act transpired, carefully consider whether backdating would constitute fabrication. The agreement could specify, amongst other things, that costs and revenue would be apportioned by reference to the historic effective date, with adjusting payments being made accordingly.
Is backdating legal?
Attorneys who inappropriately backdate documents can face ethical sanctions, lawsuits and even criminal prosecution. This is because documents take time to draft, negotiate and execute. Each of the above are examples of situations where attorneys may legally backdate documents.
Together, these factors may indicate that the beneficial interest in the relevant assets has passed from a legal point of view. The position is then clear to all who subsequently look at the document. Always proceed under the assumption that a backdated document will not remain private. This is backdating that memorializes, something the United States Court of Appeals for the Seventh Circuit has recognized as a legitimate practice. Shelf companies are generally proprietary companies whereby the suppliers are usually the original Directors and Members of the company.
These two general areas mean that some legal due diligence should be carried out to identify and address areas for corrective action. Perhaps the most fraudulent form of impermissible backdating is documenting and dating an act that never occurred.
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