ESOP Blog

We have completed 350+ transactions with over $1.6 billion total assets under our administration.

A Comprehensive Re-evaluation Needed to Better Promote Future Retirement Security

July 8, 2020

What GAO Found Fundamental changes over the past 40 years have led to various risks and challenges for the three main pillars of the U.S. retirement system. For example, current projections indicate that by 2034, the Old-Age and Survivors trust fund for Social Security’s retirement program—the first pillar—will only be sufficient to pay 77 percent…

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Can a 100% ESOP company borrow money through the plan to buy other assets?

July 1, 2020

It can, but given that virtually all 100% ESOPs are S corporations and pay no tax, there is no tax benefit to doing so. This may be a way, however, to get shares to new employees. Say a company wants to borrow money to buy a building (or any other asset). Shares would be allocated…

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ESOPs in LLCs, Partnerships, PEOs, Professional Corporations, and Subsidiaries

June 24, 2020

Can a leasing company (also called a Professional Employer Organization, or PEO) have an ESOP for its employees? A PEO employee working for a client organization (CO), known as a “worksite employee”, is often considered a common-law employee of the CO, as is the case for a worksite employee works full time at the CO,…

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Does the ESOP Fiduciary have a Role with Respect to Normal Business Operations as Opposed to ERISA and Plan Document Issues?

June 10, 2020

The trustee is the shareholder of record for corporate law purposes. As a fiduciary for these shares (or as directed by the entity or person acting as fiduciary), the trustee has all the rights any other shareholder would. These rights vary from state to state as corporate law is a state law issue. They include…

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Trends in Corporate Restructurings and Implications for Employee Pensions

June 3, 2020

U.S. Government Accountability Office GAO-19-447R: Published: Jul 12, 2019. Publicly Released: Jul 12, 2019. What GAO Found Over the past 20 years, corporate restructurings, particularly mergers and acquisitions (M&A), tended to happen more frequently during periods of economic expansion. GAO’s analysis found that from 1999 through 2018, M&A activity comprised the largest share of corporate…

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Due Diligence in Employee Ownership Transactions

May 27, 2020

What does the term “due diligence” mean? Due diligence essentially is the process of investigating if there are any potential problems that could make a transaction problematic. Generally, the buying party (such as the ESOP trustee) requires due diligence work to uncover potential problems in the company whose stock is being bought. Examples of difficulties…

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How Long Does It Take to Set up an Employee Ownership Plan?

May 20, 2020

How long does it take to set up a leveraged ESOP? Typically, the set-up process taxes anywhere from six to nine months. We have heard of plans being set up in several weeks; some take as long as two years. Several steps are necessary to set up a plan. First, a valuation is needed for…

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How Much Does Setting Up an ESOP Cost?

May 13, 2020

The cost of setting up an ESOP varies considerably, and costs can range from $60,000 to hundreds of thousands of dollars (in 2015). There are several issues to consider: Attorney fees: The basic design of the plan itself – filing initial forms with the government, negotiating with lenders, performing due diligence, drawing up trust documents,…

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What Is Ownership Culture?

May 6, 2020

Just about every ESOP company wants to have employees who think and act like the employee-owners. Compelling research and decades of experience show that employee ownership is in fact a powerful tool to improve corporate performance – but only when companies have “ownership cultures” in which employees think and act like owners. There is a…

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United States District Court – Eastern District of North Carolina Renders Pro-ESOP Trustee Decision

April 29, 2020

In Lee v. Argent Trust Company, the district court dismissed the Plaintiff’s claim that Argent, as trustee of the Choate Construction Company ESOP, committed a fiduciary breach when it paid $198 million for the purchase of 100% of the company’s stock. The Plaintiff had alleged that she suffered damages because the ESOP’s stock was valued…

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DISCLAIMER: The Articles displayed on this website do not constitute legal advice, nor do they substitute for the advice of qualified professionals. While the Articles displayed on this website are designed to provide information regarding the subject matter covered, we cannot guarantee the accuracy of any statements contained therein. If any legal advice or expert assistance is required, the services of qualified professionals should be sought.

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