ESOPs and Bankruptcy

[Guest JoeM]

Unfortunately, a company with an ESOP is experiencing dire financial woes, and is seriously considering declaring bankruptcy. How will this affect the ESOP shares? What are the duties of the ESOP fiduciaries in connection with the bankruptcy? Should the ESOP fiduciairies cause a mid-year valuation of the shares? If a participant has requested a diversification distribution and such distributions are made in cash (per the ESOP plan document), should the distribution be made even though the prior year's FMV will be used (which is obviously much higher than the bankruptcy value)? Any help would be appreciated.

[Kirk Maldonado]

Hire an experienced ESOP attorney.

[BeckyMiller]

I must agree with Kirk. I know that at times like these, adding another layer of administrative costs seems harsh. But this is a very touchy situation and the ESOP fiduciaries need experienced, professional guidance.