Download This PageLevenfeld Pearlstein, LLC (LP) has extensive experience in the legal and financial issues involved in the formation and administration of Employee Stock Ownership Plans (ESOPs) and has represented clients throughout the United States in various aspects of ESOP transactions.
ESOP COMPANY REPRESENTATION
Our attorneys are nationally-recognized for their experience in working with owners who have sold their business to an ESOP and for their skill in assisting ESOP companies comply with the complex laws and regulations involved in the administration of their plans. Our attorneys also have experience restructuring companies wishing to form an ESOP to fully realize preferential tax benefits available to them.
Representative Matters
- We served as lead counsel to a group of Chicago-based commodity trading and brokerage firms in connection with the formation of new ESOP. We assisted the owners of the prior companies to restructure their operations into a new S corporation holding company in order to facilitate the ESOP’s acquisition of 100% of the stock of the new holding company. We also assisted the new company to obtain regulatory approval for the ESOP transaction from the Financial Industry Regulatory Authority (FINRA).
- We acted as lead counsel in a multi-step transaction where an ESOP became the sole owner of a national commercial laundry company. We worked with the majority equity holders to sell the assets of the existing business to a newly formed S corporation holding company in exchange for a combination of cash, promissory notes and warrants. We also represented the new holding company in connection with the implementation of a new ESOP to purchase stock of the new holding company after the asset sale transaction was consummated and to obtain a new senior credit facility to provide the funds necessary to consummate the transactions.
- We served as counsel to the sole shareholder of a specialty engineering consulting firm in a transaction in which a newly formed ESOP acquired 70% of the stock of the company. We also served as special benefits counsel to the company to assist in the design and implementation of the ESOP and a new restricted stock program for the company’s executives.
- We acted as special counsel to the board of directors of an ESOP-owned company that received a purchase offer from a private equity firm. We assisted the ESOP company's corporate counsel in negotiating the terms of the offer and counseled the client regarding the special terms of the purchase contracts applicable to the ESOP. We also prepared various plan document amendments to address the sale of the company and the issues associated with the post-closing administration of the ESOP.
- We acted as counsel to a Chicago-based investment management firm which recently amended and restated their ESOP plan documents to comply with new rules and regulations issued by the Internal Revenue Service. We regularly counsel this client regarding various administrative matters, including developing an ESOP distribution policy. We recently assisted this client in connection with an audit by the United States Department of Labor and negotiated a settlement of all of the issues discovered during the audit. We also represented this client in a transaction in which the client redeemed shares of company stock allocated to the ESOP accounts of terminated participants in order to reallocate those shares to new employees.
ESOP FIDUCIARY REPRESENTATION
We have also represented ESOP fiduciaries in various types of transactions involving ESOPs, including acquisitions and divestitures involving the plan sponsor and ESOP termination.
Representative Matters
- We represented a trust company which was engaged to serve as the trustee of an ESOP in connection with a series of transactions under which the ESOP acquired additional shares of company stock with $27 million transferred from the company’s 401(k) plan and all of the shares of company stock held outside the ESOP were redeemed by the company for $72 million. Our engagement included conducting extensive legal and business due diligence, assistance with the preparation of the disclosure documents required for the employees to elect to transfer of 401(k) assets into the ESOP and the negotiation of the terms of a new stock appreciation rights program.
- We represented a trust company which was engaged to serve as an independent fiduciary for an ESOP transaction in which the CEO, who was the son of the company’s founder, and other members of his family sold 100% of their shares of stock of a family-owned distributor of truck parts and accessories with locations in several Midwestern states to a newly formed ESOP.
- We represented an independent ESOP fiduciary who was engaged as a successor trustee of an ESOP formed by a California-based manufacturer of tire inflation systems used by the U.S. Military in connection with the purchase of 100% of the stock of the company from its founder for $19 million.
- We represented a trust company which served as trustee of an ESOP in two separate transactions where the ESOP acquired shares of company stock from management shareholders in order to facilitate the conversion of the company to a 100% ESOP-owned S corporation to gain more favorable tax treatment.
- We represented a trust company which was the discretionary trustee of an ESOP in the sale of 100% of the stock held by the ESOP to a publicly traded company.
- We represented the CFO of a Boston-based consulting firm who was appointed as an internal trustee of the company’s ESOP in connection with a transaction in which the non-ESOP shareholders sold their remaining stock to an ESOP in order to facilitate the conversion of the company to an S corporation.
- We represented an independent ESOP fiduciary appointed by the company’s board of directors to approve a transaction in which the stock owned by the majority shareholders was redeemed by the company to settle a dispute amongst sellers of stock and non-ESOP shareholders.
ESOP LENDER REPRESENTATION
We also have experience working with various banking institutions in financing transactions involving ESOP companies.
Representative Matters
- We represented a national banking institution in connection with a $20.5 million revolving and term loan credit facility which was used to finance the acquisition by an ESOP of 100% of the stock of a citrus grower and distributor located in Southern California.
- We represented a Chicago-based lender who participated in a $90 million credit facility which was used to finance a 100% ESOP leveraged buyout transaction.
- We represented a Chicago-based lender who provided a $25 million credit facility to an ESOP to refinance prior loans by company shareholders and to enable the company to obtain additional funds for working capital and future acquisitions.
- We represented a national banking institution in connection with a credit facility to allow an ESOP to acquire a 43% stake in a Chicago-based wholesale truck part distribution company.
Levenfeld Pearlstein is a member of the ESOP Association and the National Center For Employee Ownership (NCEO). Our ESOP attorneys have also lectured frequently on ESOPs and other employee benefit topics and have authored a treatise discussing the benefits of S corporation ESOPs.
