Phantom Equity Agreements

There are two types of phantom action plans. ”Valuation-only” plans do not include the very value of the actual underlying shares and can only pay the value of an increase in the company`s share price over a specified period beginning on the date of approval of the plan. ”Total value” plans pay both the value of the underlying stock and any appreciation. A. The Phantom Stock plan should indicate the number of Phantom Stocks units or the percentages of participation to be granted to the employee. First, the company may grant an employee a certain number of units or interest as a percentage, plus in increments over a one-year period. For example, a company could first grant a 5% stake to the employee and increase interest rates to 10% after five years of service. Whether granted in advance or over a one-year period, Phantom Stock Units can be transferred either immediately or subject to a voting schedule by the company. In addition, special collection provisions may be included in the Phantom Stock plan to remove the company`s obligation to make payments to an officer at certain events (e.g. B if the employee violates competition restrictions in the plan or is terminated in some way). Actual employee equity coverage has some drawbacks to the issuance of Phantom Equity. Companies can issue shadow shares for the following reasons: As described above, phantom shares are usually cashed in – payment is treated as a bonus.

However, if the planning agreement allows, the payment obligation can be met by distributing the actual stock among the workers. Companies choose different ways to reward employees, especially those in important positions and/or who have been in the company for a long time. If you`re not sure if a ghost plan is right for you – whether it`s an employer or an employee – you can consult financial experts. Instead of having physical stocks, the employee receives stocks of derision. Even if it is not real, the Phantom share follows the actual share price of the company and pays the resulting profits. Has. As a general rule, the actual payment of benefits is deferred until a predetermined date or until the termination of the employment relationship due to retirement, death or disability.

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