20th Annual Turnaround and Transformation Survey
In an era defined by geopolitical upheaval and economic complexity, the old rules no longer apply. Read about the findings from our 2025 Turnaround and Transformation Survey.
There are a wide variety of solutions available to retain and motivate key executives and employees in restructuring situations.
Advance Paid Retention
Implementation timing: Before filing
Description: Cash paid to key employees before filing subject to claw back if the recipient resigns prior to accomplishment of a milestone (which is often a fixed date or consummation of a restructuring)
Preconditions/process considerations: Must have cash available and freedom to act (i.e., no creditor consent rights); no public disclosure for private companies
Modification of Existing Programs
Implementation timing: Before filing
Description: Existing plan, modified to continue to operate in the ordinary course during Chapter 11; could include plans that pay out quarterly to allow for flexibility to update goals
Preconditions/process considerations: Implemented via court approval; requested via employee matters motion which is filed on the first day and approved ~21 days later
Key Employee Incentive Plan (“KEIP”)
Implementation timing: After filing Chapter 11
Description: Incentive plan for “Insiders” with payout based on achievement of challenging goals
Preconditions/process considerations: Extensive due diligence by creditor advisors and the US Trustee and public disclosure; US Trustee is very likely to object on principle but can be approved by court over objection
Key Employee Retention Plan (“KERP”)
Implementation timing: After Chapter 11
Description: Pay-to-stay plan to “Non-Insiders” paid either quarterly or at end of the case as long as the participant remains employed
Preconditions/process considerations: Limited due diligence by creditor advisors and the US Trustee and public disclosure; US Trustee focuses on whether any participants are Insiders; less controversial then KEIPs
Management Incentive Plan
Implementation timing: After restructuring (negotiated pre-filing in prepackaged Chapter 11)
Description: Share scheme to reintroduce equity incentives
Preconditions/process considerations: Negotiated during discussions about Plan of Reorganization (could come up before filing is “Prepackaged” or “Prearranged” bankruptcy in a potential option)
