Section 280G Disclosure Statement

The "Section 280G Disclosure Statement" is a legal template that is used in corporate transactions or significant events involving the potential payment of the excess parachute payments to key executives or highly compensated employees. Section 280G of the Internal Revenue Code (IRC) addresses the imposition of excise taxes on excessive payments made to executives in the event of certain change-in-control transactions or corporate acquisitions.

This template serves as a comprehensive and standardized document that companies can utilize to satisfy their disclosure obligations under Section 280G. The template contains provisions for the company to disclose relevant compensation arrangements and potential payments to executives, the determination of excess parachute payments, and the potential excise tax consequences associated with these payments.

The purpose of a Section 280G Disclosure Statement is to provide shareholders and regulatory authorities with transparency and clarity regarding the potential financial implications of executive compensations in change-in-control situations. By disclosing the proposed payments and their associated tax implications, companies can demonstrate their compliance with relevant legal requirements and potentially avoid penalties or adverse consequences.

The template typically includes sections outlining the terms and conditions of the executive's employment agreement, any existing change-in-control provisions, the calculation method for parachute payments, potential adjustments to avoid excise taxes, and the intent and purpose behind this disclosure statement.

Overall, the Section 280G Disclosure Statement serves as an essential document for corporations engaged in transactions that may trigger a change in control. By utilizing this template, companies can properly disclose and address the potential financial implications, ensuring compliance with legal requirements and presenting a transparent and informed approach to their executive compensation arrangements.