Startup companies often use equity compensation to attract, retain, and incentivize employees. However, startups whose equity compensation has significantly decreased in value may need to offer employees with other opportunities for meaningful value on a merger or other exit event. The most common solution is to adopt a carve-out plan.
This article provides an overview of carve-out plans and discusses issues that startup companies should consider when implementing a carve-out plan, including business, tax, and stockholder fairness considerations.
Originally published through Thomson Reuters’ Practical Law on December 6, 2017.