A recent decision by the Seventh Circuit Court of Appeals (Judge Posner) questions whether an ESOP trustee, by accepting an annual valuation without a discount for lack of marketability (DLOM), committed a breach of fiduciary duty. Although enjoying wide discretion, an ESOP trustee’s judgment “cannot be upheld when discretion has not been exercised,” including under some circumstances the need to apply a DLOM to a redemption price. A summary of Armstrong v. LaSalle National Ass’n (2006) originally appeared in the April 2007 Business Valuation Update™. For a copy of the case abstract, click here.
And for more on the critical issues faced by ESOP analysts and administrators, be sure to join panelists Robert Schweihs, Mike Hartman, Stephen Smith, and Judith Kornfield in BVR’s next teleconference, “ESOP Valuations and Repurchase Liability,” on July 10, 2007. The experts will discuss the importance of various valuation methods, plan designs, and the effect of increasing conversion of ESOP companies to S corporations. To register, click here. As a bonus, registrants will receive 20% off the purchase price of the newly updated Guide to ESOP Valuation and Financial Advisory Services, by Schweihs and Robert Reilly (Willamette Management Assoc., 2007). Pre-conference materials will also include the invaluable “ESOP Due Diligence Checklist,” excerpted from the Guide.
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