JHawk

From my understanding in a situation like this the departing shareholder should be paid at a value that's inclusive of the shares they will be selling. But in general if shares are redeemed and the total issued and outstanding shares decrease so will the value of the company in proportion, so no change of value should necessarily occur, e.g., company valued at $1,000,000 with 100,000 shares has value per share of $10/share. If the company redeems 50,000 shares at $500,000 there will remain 50,000 outstanding shares and the company will reduce in value by $500,000 so, $500,000/50,000= $10/share Now if the appraisers are reducing the firm's value by the future repurchase of shares and then using the weighted average you described then you'll get different math since cash & equivalents gets different weighting in each valuation method. But that's not necessarily how I'd do it (unless the situation is more complicated than I read) because the value of cash in the various valuation methods is taking in all sorts of assumptions whereas the book value method described above supports these types of transactions by keeping the relationship between the company's cash to it's value pretty straightforward.

I'll be following this thread to see if anyone else comments but from my understanding (take with heavy dose of salt) we will not be filing, even with plans that need several amendments on top of the pre-approved plan. The idea being the pre-approved plans do not need to be filed or reviewed, and in the case of the additional amendments fortunately they are simple enough and we're confident they would pass any inspection/audit.

Both very insightful responses, thank you!

Hi, hoping someone less dense than me can help since I haven't been able to find any straightforward information on my own I'm trying to understand the nuance behind if a individually designed plan ESOP that previously received a determination letter (that has since expired, but it looks like the expiration date has been waived across all IDP's) needs to switch over to the Cycle 3 pre-approved plan design? I read that employers should consider adopting a pre-approved plan since IDP Esops are no longer being reviewed by the IRS. However, what would compel an employer to switch over? e.g., it doesn't seem that there is much enforcement in this area and I'm trying to find laws or rulings that would motivate or otherwise incentivize an employer with an IDP ESOP plan to switch over to a cycle 3 pre-approved plan design. Hopefully that's somewhat clear.. thanks in advance.

I believe I found my answers digging through prior threads. The 5 year cycle is no longer relevant for ESOPs and all prior determination letters are still valid (assuming no significant changes to plans), even if expired. (This was mentioned by EBECatty) Rev. Proc. 2016-37, Section 13, 01 Rev. Proc. 2016-6 provides that, effective as of January 4, 2016, determination letters issued to individually designed plans will no longer contain an expiration date. 02 Under this revenue procedure, expiration dates included in determination letters issued prior to January 4, 2016, are no longer operative.

Please go gentle on me, I'm new to all of this. Two questions I'm trying to sort out are: 1. How often do ESOPs need to be restated (is this the correct term?) to the IRS? I read every 5 years and now maybe every 6 if using this elusive prototype document process.. 1b. If a firm has not restated/resubmitted well beyond the allowed time is there a different process for restating or submitting or should that firm just hurry up and send it in to the IRS. 2. There is another post on this, so I risk redundancy, but after reading about how the IRS is now allowing ESOPs to follow the prototype, pre-approved process I'm having difficulty finding resources on this.. Anyone on here knowledge and generous to share more on this? Thank you JHawk

I'm also looking for similar guidance and hoping someone knowledgeable on this can weigh in.