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Can a company offer non qualified deferred compensation to a non-service provider?

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Company A is selling Sub X.  

Executive works for Sub X.  As part of the deal, Company A is going to provide nonqualified deferred compensation to Executive.  However, after the transaction, Executive will not be an employee or independent contractor to Company A.  

First question:  Are there any problems with Company A providing a nonqualified deferred compensation arrangement to Executive, considering Executive is not a service provider to Company A?

Second question:  What is the governing law here?  Code Section 409A is all about service recipients providing nonqualified deferred compensation to service providers.  We don't have that relationship here.  Or, do we, since Executive was a service provider to Company A's Sub X, and it is that relationship that lead to this situation?

Any advice would be helpful!

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Is it compensation for services (albeit deferred)?  If not, what is it?

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Thanks for the question jpod.  Here is the situation:

Executive had a change in control benefit with Sub X.  Company A is selling Sub X, in a transaction that constitutes a change in control.  Unfortunately, Sub X isn't worth as much as we were hoping, so the threshold for the benefit wasn't met and Executive is entitled to nothing under the change in control plan.  Company A wants to reward Executive anyway, because he did a good job setting up the transaction.  So, we are providing deferred compensation through Company A, even though Executive won't be working for Company A after the transaction.

I'd take the position the deferred compensation is for services.  So, I think I'm comfortable saying Company A is a service recipient and Executive is a service provider.

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I am in complete agreement that it is compensation from A for services and subject to 409A. 

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