SG&F has handled the design and installation of hundreds of ESOPs, so clearly the focus of our practice is starting up rather than shutting down ESOPs. Nevertheless, there are times when we are called on to assist in the termination of an ESOP. Sometimes it make sense to shut down an ESOP for various reasons, such as the ESOP company being sold in a stock sale and the purchaser does not wish to continue the ESOP, or when the assets of the ESOP company are acquired and the ESOP must be terminated so that participants can receive their share of the sale proceeds, or perhaps the stock price has stagnated or declined to the degree that the ESOP is no longer a viable employee incentive. While the trustee is advised of and may be consulted on the details of the ESOP’s termination, the decision to terminate and wind up an ESOP is a sponsor’s decision for the Board of Directors to make.
Our extensive experience with the termination of ESOPs can ensure the termination of your ESOP is handled correctly. SG&F can also help you:
- Determine whether or not termination is the best approach or whether there is a better solution
- Structure and document how unallocated shares held in the ESOP’s suspense account are handled in the termination process
- Assist with the remediation of any document or operational issues that must be corrected before the ESOP can be terminated, including preparing any missing amendments or correcting problems with the document, and
- Prepare and file a submission to the IRS for a favorable determination letter
Compliance Audits | Corporate Governance | Creation & Operation | Mergers & Acquisitions | Termination | Transaction Structure & Implementation