A clawback is a contractual or legal provision that allows money or benefits already paid out (or granted) to be recovered/returned if certain conditions occur.
Common clawback examples:
- Executive compensation: a company can recoup bonuses/equity if financial results are restated, misconduct is discovered, or performance targets weren’t actually met.
- M&A / indemnities: a buyer can recover part of the purchase price (or escrow) if the seller breached reps/warranties or there are specified losses.
- Private equity/venture funds: a “GP clawback” can require managers to return excess carried interest so final profit splits match the agreed waterfall.
