The Department of Labor’s Employee Benefits Security Administration team has continued to maintain its focus on employee stock ownership (ESOP) transactions, with a focus on valuation issues regarding ESOPs established by privately held companies. The DOL has given greater attention to the reasonableness and reliability of valuations, which, if undertaken incorrectly, can lead to the ESOP paying more than “adequate consideration” for shares of employer stock. This focus on valuation issues has resulted in several enforcement actions and settlement agreements that now serve as guidance to fiduciaries and counsel.
In 2014, the DOL entered into the first process settlement agreement with GreatBanc Trust Co. Since then, the Great Banc agreement has become a widely cited guide for the due diligence process for ESOP transactions, providing trustees with guidelines to satisfy their fiduciary duties in ESOP transactions.
These procedures were expanded at the end of 2017 with the DOL’s settlement agreements with First Bankers Trust Services Inc. and Alpha Investment Consulting Group L.L.C. More recently, the DOL has entered into another settlement agreement with Lubbock National Bank (the LNB agreement), which is similar to the Great Banc agreement.
The most pertinent elements of these settlement agreements focus on:
- The selection of valuation advisers, oversight of appraisers
- Analysis and reasonableness of financial statements and document preservation
- The fiduciary review processes
Counsel and ESOP sponsors must recognize the differences and additions of each settlement agreement to understand the DOL’s perspective on the duties of ESOP trustees and advisers in such transactions.
In this practical webinar, you will receive a detailed overview of the process agreement and guidance on rules and procedures relevant to fiduciary and compliance responsibilities of trustees and advisers in ESOP transactions. Among other things, you will learn the implications of recent DOL settlement agreements and best practices in satisfying fiduciary duties in ESOP transactions and avoiding litigation.
Upon course completion, you will be able to:
- Outline rules and procedures relevant to fiduciary and compliance responsibilities of trustees and advisers in ESOP transactions
- Address the implications of recent DOL settlement agreements
- Implement best practices in satisfying fiduciary duties in ESOP transactions and avoiding litigation