Employee Stock Ownership Plans (ESOP)

Our lawyers are committed to helping clients realize their key business and tax objectives with their ESOPs. Among other areas, our ESOP team advises trustee clients by conducting thorough due diligence reviews, negotiating deal terms and transaction documents, and assisting the trustee in their role of establishing and negotiating the purchase price for a sale or acquisition of company stock. Also, we represent lenders that finance ESOP transactions where we leverage our overall understanding of ESOP transactions to document and negotiate the terms and conditions of the credit agreements and advise on transaction structure, compliance with the law, and material due diligence.

Our attorneys and other professionals have:

• Counseled clients (sponsors, trustees, and shareholders) as to pros and cons of ESOP implementation; worked with clients to understand related issues (e.g., funding requirements, fiduciary responsibility, prohibited transaction rules, pass-through voting rights, related administrative and legal compliance issues, etc.).
• Assisted sponsoring employers, trustees, advisors, and administrators with adoption, implementation, and communication of ESOP plans.
• Represented lenders in connection with negotiating, structuring, and documenting ESOP loans.
• Advised a regional manufacturer S corp with an ESOP regarding adjustments to ESOP distribution options and processes, as well as managing and funding repurchase liabilities.
• Assisted a national rail transportation company to fix multiple plan document and administrative errors under the company’s ESOP, and obtained a compliance letter from IRS waiving excise taxes and other penalties.
• Advised an ESOP company on refinancing its ESOP loan and restructuring its ESOP design in connection with the reorganization of the company’s business.
• Counseled an ESOP trustee of a publicly traded company regarding securities compliance and exemptions, as well as fiduciary issues, in connection with a going-private sale of the company’s stock.
• Advised a publicly traded diversified manufacturer on structuring dividend payments as deductible contributions to ESOP.
• Advised an ESOP sponsor concerning rebalancing and reshuffling guidance (IRS Technical Assistance Request 4).
• Counseled and assisted ESOP plan sponsors with Department of Labor audits.
• Counseled ESOP trustees for issues raised by the Department of Labor and assisted with resolution of same.
• On behalf of a successor independent ESOP trustee, worked with Department of Labor and selling shareholder/prior trustee to resolve ESOP sale valuation issues resulting in substantial sum being returned to ESOP trust.
• Counseled an ESOP sponsor for IRS voluntary compliance submission and related correction concerning IRC Section 409(p) failure.

Members of Clark Hill’s ESOP team have served in leadership roles in many industry-related groups including The ESOP Association, Exit Planning Institute, and National Center for Employee Ownership.