Ensure Compliance With Final Regulations On Equity Awards

The Department of the Treasury has issued final regulations setting forth changes to the current regulations under Internal Revenue Code (Code) Section 162(m). Code Section 162(m) precludes a deduction by a public corporation for compensation paid to a "covered employee" to the extent that the compensation exceeds $1,000,000 in any taxable year. "Covered employees" include the company's chief executive officer and the three highest paid officers (excluding the chief executive officer and the chief financial officer).

The final regulations require that the plan specifically state the maximum number of shares with respect to which stock options or stock appreciation rights may be granted during a specified period to any individual employee. With respect to newly public companies, the final regulations clarify that restricted stock units and phantom stock units must be paid—rather than merely granted—before the end of the Reliance Period (as defined below) in the