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Property Casualty

Transitioning Your Company’s Ownership — Are There Insurance Implications?

Miles Weis
Miles Weis
AVP, Executive Risk and Cyber Practice Leader

Business transitions are very complicated, and taxing — pun intended — matters. For Employee Stock Ownership Plan (ESOP) transitions, there’s the added complexity of the Employee Retirement Income Security Act (ERISA). Because a transition of power is stressful and company leaders have enough to worry about during this time, insurance shouldn’t be one of them. That’s why having the right insurance broker partner in place is crucial.

Ownership Transition Options

First, if you find yourself looking to transition ownership of your company, the good news is that with proper planning, there are several options available to consider. You could:

  • Transition the ownership to a family member
  • Sell the business to a third party (strategic buyers, financial buyers, whole or partial sale)
  • Conduct a management buyout (“MBO”)
  • Sell to employees through an ESOP
  • Or execute a combination of two or more of the above options

If after careful consideration you have determined an ESOP is the right path for your organization, you’ll want to look for (and avoid) issues that can delay or derail your transaction and create additional expenses. Keep in mind, trustees and their counsel generally will not sign off on transactions without adequate insurance protection in place.

Having the Right Insurance Coverage

I can tell you that our Holmes Murphy team has been called in numerous times at the last minute in a sale to quickly put adequate insurance coverage in place so that the transaction can close. That’s a last-minute stress you don’t need.

These transactions are complicated and need expert advisors to navigate the process — an expert who is experienced with:

  • the ESOP transaction process
  • the various professional advisors involved
  • the sensitivity of the documents and information
  • the insurance needed
  • efficient at placing high quality insurance coverage that takes that burden off your shoulders

A good partner (and, in this case, insurance broker) will simplify the process and reduce time, stress, and cost from the transaction and make for a better experience.

At Holmes Murphy, the mission of our dedicated ESOP practice is to make the insurance and risk management experience better for employee-owned companies. Fortunately, this also includes companies that are considering ESOP or are in the process of becoming ESOP. Our team of seasoned professionals are your trusted advisors when it comes to insurance matters.

If you control the process and are proactive, we will help you get it right the first time. So, don’t hesitate to reach out and let’s get the process going!

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