Using an employee stock ownership plan (ESOP) as a vehicle for a company owner to sell to family members or their management team has been made more expensive — and may become a lot less popular — after the settlement of a lawsuit between the U.S. Department of Labor (DOL) and First Bankers Trust Services Inc.
Through a civil claim, the DOL accused First Bankers of breaching its fiduciary duties by approving the sale of 49 percent of Maran Inc., a private label denim manufacturer, to the Maran ESOP (employee stock ownership plan), for which it served as independent trustee.
A settlement in the case agreed to on Sept. 21 effectively adds to the rules that must be followed by other ESOPs: Trustees that establish ESOPs must now demonstrate that there was proper consideration given to the ESOP as a buyer of a company and/or that it has effective control; such demonstration might include establishing a board that includes an independent director or, alternatively, receiving a discount in the purchase price.
Continue Reading for Free
Register and gain access to:
- Breaking benefits news and analysis, on-site and via our newsletters and custom alerts
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the property casualty insurance and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
