Abstract
Historically, corporations have used key employee retention plans—commonly referred to as “KERPs”—to ensure that senior and mid-level executives remain with the company in times of financial distress. With the enactment of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCA), and section 503(c) in particular, the Bankruptcy Code has gone from being virtually silent on the subject of KERPs to imposing stringent restrictions on the adoption of any retention plans for the benefit of “insiders” of the bankrupt company. Although some concern has been expressed in the restructuring community over the negative impact of these changes, the adoption of 503(c) may not have foreclosed all avenues to retaining, compensating, and incentivizing essential employees. <b>TOPICS:</b>Private equity, financial crises and financial market history, analysis of individual factors/risk premia
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