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Employee Compensation Plans
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Independent Financial Advisor
Employee Compensation Plans
£607 Million
Financial Advisor
CALCULATION AGENCY FOR EMPLOYEE COMPENSATION PLANS
A Calculation Agent may be appointed by the company to perform the calculations required pursuant to the documentation of the compensation plan.
- If appointed pre-inception of the plan (which is the way we are asked by issuers to operate most of the time), ConvEx can also test the relevant provisions setting out those calculations to ensure these will operate as intended and provide support in drafting of the transaction documentation – and will be named in such documentation as the party formally responsible for performing such calculations (which are formal and binding on all concerned parties).
- If appointed post-inception of the plan, ConvEx can still support the issuer without being named in the transaction documentation) in dealing with calculations under their transaction, operating with (and providing guidance on) the documentation as drafted.
WHEN APPOINTED AS CALCULATION AGENT PRE-INCEPTION, CONVEX DOES THE FOLLOWING:
BEFORE INCEPTION
see moreDuring the life
see moreON VESTING/EXERCISE
see more- We undertake a detailed review the operability of the calculations set out in the terms and conditions and, if requested to do so, provide comments (to the company or other parties working on the transaction) to ensure that the calculations will be able to be performed:
- as intended and on the basis of clearly observable inputs, removing as much as possible any drafting ambiguity (and the associated risk of a dispute later on); and
- on a timely and accurate basis when they are needed during the life of the transaction.
- We can also assist the issuer and parties working on the transaction in identifying potential issues, for example scenarios in which a calculation might not produce the expected result, for example as a result of the interplay between multiple sections of the documentation.
- Because of our extensive experience we are normally able to find solutions from precedent transactions to help manage these issues, or otherwise can help to craft language that will solve the identified issues.
- Using public corporate actions data, we monitor (where possible) for corporate actions and other events which might trigger the need for a calculation to be performed under the terms of the plan and notify the issuer as early as possible.
- We take formal responsibility for performing all formulaic calculations required to be made in accordance with terms and conditions, while also:
- consulting with the issuer, including providing them with preliminary or illustrative calculations for their internal review.
- performing the final, formal calculations and notifying all relevant parties.
- We can perform further calculation simulations as may be requested by company in preparation for the final calculations.
- We are typically responsible for performing all performance and settlement calculations when the plan comes to its end.
- We take formal responsibility for performing all formulaic calculations required to be made in accordance with terms and conditions, while also ensuring the client understands what we are doing.
WHEN APPOINTED AS CALCULATION AGENT POST-INCEPTION, CONVEX DOES THE FOLLOWING:
WHEN WE ARE APPOINTED
see moreDuring the life
see moreON VESTING/EXERCISE
see more- We undertake a detailed review of the operability of the calculations set out in the terms and conditions, to ensure that we will be able to perform them on a timely and accurate basis when they are needed during the life of the transaction.
- If the client so wishes, we can also undertake a detailed review of all previous calculations (if any) performed prior to our appointment
- If we identify any areas of uncertainty or potential issues, we make note of these so that we can be aware in the event they arise later in the life of the transaction.
- Because of our extensive experience in performing calculations on equity-linked instruments, we are normally able to find solutions to help the client manage any issues that arise.
- Using public corporate actions data, we monitor (where possible) for corporate actions and other events which might trigger the need for a calculation to be performed under the terms of the plan and notify the issuer as early as possible.
- Because the documentation does not give us formal responsibility for calculations, we support the issuer in ensuring the calculations are made accurately and on a timely basis, so that the issuer can be confident in the results. We also:
- provide issuers with preliminary or illustrative calculations for their internal review.
- share final, formal calculations and notifying all relevant parties (trustee, agent, etc.).
- We can perform interim performance determinations as well as calculation simulations as may be requested by the client in preparation for the final calculations.
- We support the issuer in performing all performance and settlement calculations when the plan comes to its end.
INDEPENDENT EXPERT OPINIONS FOR EMPLOYEE COMPENSATION PLANS
Some share-based compensation plans may include reference to a third party to be appointed in future to make certain determinations. Alternatively, such third party may be appointed to support the company’s management team or board in a decision it is required to take, or to clarify some uncertainty (or settle a dispute). This might be referred to as an “Independent Advisor”, “Independent Expert”, “Independent Financial Advisor”, “Independent Investment Bank”, or several other names.
The need for an independent expert may arises in the event of a calculation or other determination which is not set out formulaically in the terms and conditions of the instrument (including any complex determination which might have been seen as unlikely from the start, and as such no party was hired in advance to perform it), or in the event of multiple events triggering an adjustment to the exercise price occurring simultaneously, or more generally in the event of uncertainty (or a dispute) as to how a calculation should be performed. It may be used to support the fairness of a decision by the board.
Our extensive experience and knowledge of equity-linked securities documentation allows us to consider the formulaic provisions, but also to put them into a market context (including any applicable precedents) to assist in clarifying the original intent to arrive at a fair solution. We provide written opinions for the issuer’s reliance.
VALUATION FOR SHARE-BASED EMPLOYEE COMPENSATION PLANS
Some plans may require the issuer to mark to market in their accounts over time, based on market movements and other inputs.
When we provide valuations for our issuer clients, we approach these with a detailed understanding of the transaction documentation as well as trading of the instrument in the market. As a result, our valuations are both technically accurate and reflect market levels for the instrument, rather than simply technical valuations based on unrelated market data.