Media Centre

Client Update | Retention Mechanisms of Founders and Key Employees (Reverse Vesting and Holdback)

14 June 2017

On June 12, 2017, the Israel Tax Authority (the “ITA”) published on its website a circular (the “Circular”) addressing the tax implications of two major retention mechanisms of founders and key employees (the “Key Persons”) that are commonly used in the high tech industry: (i) the Reverse Vesting mechanism whereby shares of Key Persons are subjected to forfeiture rights that expire gradually over a defined employment period; and (ii) the Holdback mechanism whereby a portion of the sale proceeds of Key Persons’ shares are paid to them gradually over a defined period following the sale transaction, subject to their continued employment with the acquired company during such period.

To read the full update – click here

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