What Is Backdating?
Backdating is the practice of denoting a document, whether a check, contract, or one more legally binding document, with a date that is prior to what it ought to be. Backdating is typically prohibited and could in fact be unlawful or fraudulent in light of the situation. Sometimes however, backdating can be acceptable; be that as it may, the gatherings included must consent to it.
Consider the accompanying instances of common backdating situations that are not permitted:
- On Dec. 10, a tenant, who has missed his Dec. 5 cutoff time for rent payment to his landlord, predates a check to Dec. 4 and presents the check to the landlord.
- On April 30, a taxpayer, who has disregarded the April 15 cutoff time to make a tax-deductible individual retirement account (IRA) contribution for the previous tax year, predates a check to April 1 and sends the check to her financial advisor.
- On July 4, a vehicle owner, who didn't pay his vehicle insurance premium for July, crashes his vehicle into a left vehicle while messaging. He predates a check to pay his July premium and submits it to the insurance company.
The following are a couple of instances of situations where backdating may be acceptable:
- A person needs to buy a life insurance policy and make it effective beginning at a date prior to the current date. The insurance company typically would permit this backdating to happen for however much six months sooner, yet the policyholder must pay the premium amount covering the prior period.
- A person needs to buy health insurance and make it effective beginning at a date prior to the current date. The insurance company could possibly permit backdating relying upon the state where the person resides. Whenever permitted, backdating for a six-month period would apply as long as the buyer pays for that time.
- Two gatherings in a business contract unequivocally concur recorded as a hard copy that an effective date for the contract might be made at a date prior to the current one. In this case, backdating could be helpful on the grounds that the gatherings had proactively started following up on the agreement as they were completing the subtleties of the last written contract.
Instances of Fraudulent Backdating
During the 2000s, there was a spate of backdating stock options, for the most part at technology firms that depend vigorously on stock options for executive compensation, yet additionally at certain companies not in the tech sector. The backdating scheme included moving the effective date for practicing the options from when the options were 'out of the money' to a date that made the options 'in the money' to permit certain executives to productively exercise their options.
Companies like Apple, Comverse, and McAfee — as well as Broadcom, Monster Worldwide, and UnitedHealth Group (UNH) — to give some examples, participated in this fraudulent activity to shifting degrees and were forced to pay fines and punishments and conduct tedious and costly restatements of their books.
- Backdating is the practice of denoting a check, contract, or other legally binding agreement with a date that is prior to the current date.
- Backdating is normally not permitted and even can be unlawful or fraudulent in certain situations.
- Nonetheless, there are times while backdating can be acceptable, yet the gatherings included must consent to it.