Change of Corporate Structure

[HCE]

We have a parent who is owned by an ESOP.  The parent owns Company A, and Company A owns Company B.  We were told that we had to have this structure because of the ESOP.

We would like to change the structure so that the parent owns Company A and Company B (making A and B sister companies).  I don't see any problem with doing this, but I am concerned with messing up something in the ESOP based on the previous advice.  Is there anything preventing us from making the change?

[EBECatty]

This is fine as long as you keep the parent in place as the ESOP's plan sponsor.

The ESOP can have only one employer security--the parent's stock--and any subsidiaries wholly owned by the parent would simply be incorporated into the parent's stock price. 

[HCE]

2 minutes ago, EBECatty said:

This is fine as long as you keep the parent in place as the ESOP's plan sponsor.

The ESOP can have only one employer security--the parent's stock--and any subsidiaries wholly owned by the parent would simply be incorporated into the parent's stock price. 

Thank you!  Any idea why we would have been previously advised that we had to have the vertical structure described above?  That is the only thing causing me pause.

[EBECatty]

Not sure. I've never seen that as a requirement, but certainly do your own due diligence with your ESOP counsel.