Hawkins Parnell & Young, LLP
Setting Up ESOPs in Today's Market

Hawkins Parnell & Young, LLP (Hawkins Parnell) is a national defense litigation firm that also specializes in creating employee-owned and employee stock ownership plan (ESOP) companies and defending related ESOP fiduciary and valuation litigation. Devising winning defense strategies and bringing court cases to verdict is Hawkins Parnell’s trademark. It has litigated over 1500 trial cases in all 50 states and has attorneys located in 17 cities, coast to coast.

An industry expert in crafting ESOPs across diverse business sectors, Hawkins Parnell offers counsel to achieve tax savings, finance benefits, implement corporate governance protections, and employee benefits. Hawkins Parnell also defends fiduciaries, directors, officers and selling shareholders who have engaged in ESOP transactions and tackles alleged breaches of the Employee Retirement Income Security Act, as amended (ERISA), claims from the U.S. Department of Labor (DOL) and/or the class action private plaintiff’s bar. For cases that escalate to litigation, Hawkins Parnell’s attorneys put up a solid defense to find an economical solution.

For most ESOP projects, financing remains a significant challenge. The majority of deals today rely on seller-financing transactions rather than external bank funding. To facilitate these transactions, Hawkins Parnell collaborates with small business administration Section 7a lenders and helps its clients to source loans that do not require personal guarantees.

For more than six decades, Hawkins Parnell has consistently navigated high-risk litigation and resolved complex business disputes for numerous organizations and individuals. When working with corporations to design and implement ESOP transactions, Hawkins Parnell advises its clients about ways to ensure that the tax consequences of transactions and the resulting post-transaction structure are executed with proper documentation that addresses ERISA and Internal Revenue Code of 1986, as amended (Code), requirements to protect clients’ interests. Hawkins Parnell’s preventive strategies are designed to limit the exposure to risks associated with litigation matters and prepare clients to respond to government investigations on a posttransaction basis.

“Our ability to identify practical solutions stems from years of experience gained from working with corporate plan sponsors and officers, selling shareholders, institutional trustees, valuation companies and other advisors that manage the implementation of ESOPs,” says David R. Johanson, senior partner and partner-incharge of the Napa office of Hawkins Parnell.

This expertise has translated into multiple cases where corporations have benefitted from using its professional advisory services for business succession planning purposes. A notable instance involves a government contractor who wanted to create an employee-owned ESOP company. Hawkins Parnell helped them set up the ESOP, arrange for the sale of company stock to the ESOP trust, and collect reimbursement of over fifty percent of the ESOP funding costs from the U.S. government through appropriate billing in accordance with the Defense Contract Audit Agency Standards. The employer received tax deductions for all their contributions to the ESOP trust at the corporate, federal and state levels. Hawkins Parnell’s expert services facilitated a win-win situation where the selling shareholders deferred their capital gains taxes on the sale proceeds, and the employees gained business equity without any personal cash outlay.

Often, the DOL approaches ESOPs with skepticism, deeming them detrimental to employee interests. Hawkins Parnell works to change this misconception by demonstrating that the majority of ESOP deals are conducted fairly and in accordance with the complex legal standards.

To deliver professional services to clients, Hawkins Parnell adopts a meticulous approach whereby it studies the clients and their associated financial metrics and collects vital due diligence information and documentation to create informal ESOP feasibility studies prior to the implementation of ESAOPs. These studies help determine the viability of implementing ESOPs for business succession planning purposes.

Led by David R. Johanson and Rachel J. Markun, who have handled more than 750 ESOP transactions over the last four decades, the litigation team of close to 200 attorneys defends multiple cases that range from mainstream benefit claims litigation to complex class actions involving ESOP valuations and related transactions.

With a penchant for creating successful employee ownership for corporations, Hawkins Parnell stands out as the preferred choice for implementing and managing ESOPs with minimal disruptions to operations.