CLAWBACK? – Under the Insolvency Act 1986

This term has many meanings depending on the context in which it is used, including:

In relation to insolvent companies, the power of a liquidator or an administrator of a company to challenge transactions entered into by the company and recover company property under the Insolvency Act 1986 for example by applying to the court to set aside transactions at an undervalue or preferences.

In relation to executive pay and incentives, the compulsory repayment of cash, or transfer of shares or other assets, previously paid or delivered to an employee or director, especially in the form of a bonus or share incentive award. Clawback may be imposed because the supposedly good performance for which the original payment was made has been reassessed, the performance of the business has deteriorated severely after the payment, or the executive has misbehaved in some way. There are significant legal and practical obstacles to clawback of this kind.

 

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