Award Mouse thought multimedia interface book medal screen monitor

    Employee Stock Ownership Plans (ESOP)

    Our ESOP practice specializes in guiding companies, sellers, trustees and lenders through all aspects of the ESOP process and transaction, including the design, structure, drafting, implementation and administration of ESOPs. Our team also brings extensive experience in guiding clients through pre-transaction corporate restructuring, advising ESOP trustees on meeting their ERISA fiduciary obligations in the formation of an ESOP, and representing financial institutions involved in financing ESOP transactions. We take great pride in representing small- to mid-size businesses throughout the formation of their ESOPs and helping them navigate the complexities of ERISA, corporate governance and tax matters. We also work closely with clients to develop strategies for growing and evolving their ESOPs, often serving as long-term partners in their future planning and expansion. Our team has advised numerous clients nationwide through every stage of the ESOP lifecycle, including buy- and sell-side transactions, ongoing compliance, litigation, Department of Labor (DOL) investigations and Internal Revenue Service (IRS) audits.

    Our Team Approach

    Our ESOP practice is supported by a cross-functional team of lawyers with deep experience in corporate law, the Employee Retirement Income Security Act (ERISA), tax, finance, labor and employment, union, executive compensation, regulatory, litigation, and other industry specific practices tailored to each client. Our breadth of experience allows us to handle almost any ESOP matter in an efficient, cost-effective manner. We provide practical solutions, proactive planning, and sophisticated analyses tailored to each client – regardless of size. We are committed to developing creative approaches to problems, and partner closely with our clients to drive innovation and facilitate growth in a global economy. We anticipate the unexpected and are accustomed to advising leaders on a moment’s notice.

    By learning the needs of the client directly, as well as how goals and strategies are aligned across various departments, we are able to identify potential issues early on. This early insight allows us to offer more effective recommendations earlier in the process, helping us stay proactive and cost efficient throughout the engagement.

    Our Process

    We have deep experience working with multiple shareholders and developing transaction and pre-transaction actions that result in smooth, equitable, and efficient ESOP formations.

    Although every ESOP transaction is different, our lawyers provide strategic guidance targeted to the specific business needs of the company and the objectives of its shareholders. We work collaboratively with your advisory team to structure each transaction in a way that is thoughtfully designed to achieve both your goals and those of the business.

    The complexities of an ESOP transaction can seem overwhelming, which is why our team is dedicated to guiding you through each step, making the process as seamless, clear, and manageable as possible.

    Explore

    Our ESOP lawyers have extensive experience in:

    • Advising on the formation and establishment of leveraged and non-leveraged ESOPs, including pre- and post-tax and corporate restructuring.
    • Assisting companies in deciding whether to sell to an ESOP or pursue other strategic transaction options.
    • Providing guidance on corporate restructuring before the sale to an ESOP, including divesting parts of the business or consolidating the corporate structure.
    • Advising ESOP trustees with complex ESOP formations to assist meeting their fiduciary requirements under ERISA.
    • Assisting with DOL and IRS ESOP audits.
    • Providing proactive advice regarding the latest regulatory changes with respect to ESOP plan terms.
    • Helping sellers navigate the  Code Section 1042 process with the IRS.
    • Providing day-to-day ESOP administration advice and counsel.
    • Attending ESOP committee meetings and advising on ERISA fiduciary matters.
    • Converting ESOPs into keystone savings and profit-sharing plans (KSOPs) when clients decide to convert from a private to a public company.
    • Assisting ESOP-owned companies in strategic acquisitions.
    • Assisting ESOP-owned companies to manage their repurchase obligations.
    • Advising on executive compensation matters, such as management incentive plans.

    ESOP Transaction and Regulatory Experience

    We have a nationally recognized ESOP transactions practice with a team that is well-versed in the evolving regulatory requirements of an ESOP. We have extensive experience representing all types of entities, ranging from partnerships, limited liability companies, C corporations, S corporations, and conversions across a wide variety of industries. Specifically, our experience includes the establishment and maintenance of leveraged and non-leveraged ESOPs for both C corporations and S corporations that include government contractors and other public and closely held businesses.

    Furthermore, we have expertise in helping our privately held ESOP clients transition to public companies with KSOPs. Our ESOP transaction team also represents ESOP trustees and ESOP lenders. We are fully equipped to handle sell-side and buy-side transactions, as well as DOL and IRS audits, including ESOP-related litigation disputes. Our team collaborates closely with other ESOP professionals involved in the transaction, such as independent appraisers, accountants, recordkeepers, and independent fiduciaries, ensuring a seamless process for our clients.

    Representative examples of the ESOP matters we routinely handle include the following:

    • Operations consulting company – Represented in the 100% sale of its stock to an ESOP.
    • ESOP Trustee – Represented in the stock purchase of a medical practice revenue cycle management company in the formation of a 100% ESOP.
    • Construction company – Represented in the 100% sale of its stock to an ESOP and a related 1042 exchange.
    • Construction company – Represented in the 100% sale of its stock to an ESOP.
    • ESOP-owned S corporations – Represented in the acquisitions of additional government contractors to expand their existing businesses.
    • Emergency catering company – Represented in the 100% sale of its stock to an ESOP.
    • ESOP trustee – Represented in the stock purchase of a steel processing company in the formation of a 100% ESOP.
    • ESOP trustee – Represented in the stock purchase of an advertising trade firm in the formation of a 75% ESOP.
    • Lender – Represented in a US$47.5 million senior secured credit facility to a tree care company forming a 100% ESOP.
    • Private equity company – Represented in its acquisition of a US$200 million minority-owned ESOP company.
    • ESOP trustee – Represented in the stock purchase of an airport maintenance company in the formation of a 100% ESOP.
    • Private company – Represented a company that sold a majority stake in its ESOP-owned business to private equity (Ohio Employee Ownership Center 2018 ESOP Impact Award). 
    • ESOP plan sponsor – Represented in its defense against its ESOP trustee’s attempt at removing its board of directors for alleged ERISA fiduciary breach violations.
    • Various companies – Represented in their pre-and post-corporate restructure to best position the respective company prior to the sale to the ESOP, and following the ESOP closing.

    ESOP Compliance Experience

    ESOPs are governed by the Internal Revenue Code and ERISA. ESOPs are qualified retirement plans, which are a core area of our day-to-day work. Our work in this area includes:

    • Drafting plan documents, trust agreements, summary plan descriptions and employee communications for all types of qualified plans (including employee stock ownership, pension, money purchase pension, profit sharing and 401(k) plans).
    • Preparing IRS filings with respect to plan qualification and subsequent compliance.
    • Plan terminations, both full and partial.
    • Plan spinoffs and mergers.
    • Miscellaneous plan administration matters.

    Our qualified retirement plan services include:

    • Monitoring all aspects of ERISA and federal tax law, including the new SECURE Act 2.0 legislation, to identify areas of potential exposure and offer cost-effective solutions.
    • Planning regarding program structure and design, including providing advice on benefit strategies and policies with respect to eligibility and participation requirements.
    • Counseling ESOP plan committees, trustees and other plan fiduciaries about administrative matters and their powers, as well as their duties under ERISA and other applicable laws.
    • IRS submissions of plans and amendments for IRS determination letters.
    • Conducting fiduciary operational reviews.
    • Advising on and supervising corrective actions and, if necessary, submitting these actions to the IRS and DOL.
    • Representing employers in IRS and DOL audits.
    • Advising ESOP-owned S corporations regarding Internal Revenue Code Section 409(p) anti-abuse rules.
    • Compliance with law advice on various administrative issues involving ESOP-owned S corporations and C corporations, including diversifications, distributions, qualified domestic relations orders, pass-through voting, Form 5500 and tax-qualification compliance.

    Plan Audits

    ESOPs are subject to audit by both the IRS and the DOL, and such audit activity has increased dramatically in recent years. In addition, after the DOL entered into a processing agreement with the GreatBanc Trust Company, DOL and IRS ESOP audits have grown exponentially. As such, we have represented our ESOP clients in all aspects of audits, including attempts to resolve issues with the examining agent, appeals within the IRS or DOL, and litigation. The use of effective legal counsel in connection with such audits is an extremely cost-effective way to reduce or eliminate claims.

    ERISA and Benefits Litigation

    Our team represents employers and plan fiduciaries in all manner of litigation with respect to benefits matters, including the defense of alleged violations of ERISA, claims based on malfeasance in the administration of a plan or the investment of its assets, various claims based on alleged denials of health insurance coverage or reimbursement, or alleged discrimination in coverage or benefits.

    • We represent clients in their ERISA litigation throughout the US.
    • Our successes include numerous published decisions.
    • We have extensive experience in ERISA class action litigation.
    • We are the co-author of “ERISA Fiduciary Claims: Planning, Protecting and Preparing for Class Actions,” appearing in Employee Relations Law Journal.

    Additionally, we have the technical know-how on ERISA counseling and fiduciary investigative audits, and due diligence regulatory and operational compliance reviews of qualified retirement plans, which further complements and enhances our litigation capabilities around the country.

    Our ESOP Team Cross-functional Practice Areas

    Our Corporate Practice Group is a leading corporate group with more than 400 corporate lawyers. We are ranked consistently by Law360 as one of the Top 20 law firms that have the largest global presence and were involved in the largest, most significant and groundbreaking international and cross-border matters over the past year.

    We are consistently recognized among the top-ranked legal M&A practices for corporate transactions. Our US corporate lawyers have extensive experience in advising on all types of transactions, meaning that our lawyers have great market insight. When it comes to M&A, we provide comprehensive multidisciplinary services from deal inception through the closing process and post-closing integration. Last year, our corporate lawyers completed the following for our clients:

    • 300+ M&A deals
    • 60+ technology deals
    • 50+ energy and natural resources deals
    • US$43 billion+ aggregate deal value

    Market Recognition

    • Tier 1 for mid-market M&A (up to US$500 million) – Legal 500 US 2024
    • Band 1 for M&A – Chambers USA 2024
    • Tier 1 for Corporate – Best Lawyers “Best Law Firms” 2024
    • Tier 2 nationally for M&A – Best Lawyers “Best Law Firms” 2024
    • Ranked 11th for US Middle Market: Announced Deals (ranked by volume of deals) – Factset Q1, 2024
    • Ranked Top 30 globally by volume of deals – Mergermarket Global Legal Adviser 2023

    Our Tax Strategy & Benefits Practice Group is composed of more than 50 professionals, many who are consistently recognized as leaders in their chosen fields. The team is represented in 23 offices across nine countries. With a physical presence and practical experience across five continents, our team has the local and global expertise to provide the necessary tax support to clients’ ambitions to grow their businesses and net worth across the world.