Document background
The Phantom Shares Agreement serves as a crucial instrument for companies operating under German law who wish to implement employee incentive programs without diluting actual shareholding or complicating their corporate structure. This document type is particularly valuable for private companies, subsidiaries of foreign corporations, or organizations with complex shareholding structures. The agreement establishes a contractual framework for granting virtual participation rights that mirror the economic benefits of real shares, detailing the calculation of benefits, vesting conditions, and payout triggers. Under German law, phantom shares (virtual shares) are treated as deferred compensation, requiring careful consideration of employment law, tax implications, and corporate governance requirements. The document typically includes comprehensive provisions for various scenarios such as company exits, termination of employment, and change of control situations.
