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Who Is Legally Responsible for Valuing the ESOP Stock?

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The ESOP appraisal process is the legal responsibility of the trustee. Learn more about the process in this video.

 

ESOP Valuation

The ESOP trustee is the owner of the shares and must report the value of the stock annually. The trustee is also required by law to use a qualified independent appraiser if the stock is not publicly traded or readily tradable on an established securities market.

The trustee is responsible for:

  • selecting the appraiser,
  • the assumptions that the ESOP appraiser uses in setting the value,
  • the methods and formulas that the ESOP appraiser uses to calculate the value, and
  • the mathematical accuracy of the appraisal report itself.

In recent years, ESOP appraisals have come under great scrutiny for the underlying financial assumptions that support the valuation such as the credibility of projections and the impact of the economy on the company’s business plan on whether or not the value is a prudent valuation.

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EDITOR’S NOTE: We did the best we could to make sure the information and advice in this article were current as of the date of posting to the web site. Because the laws and the government’s rules are changing all the time, you should check with us if you are unsure whether this material is still current. Of course, none of our articles are meant to serve as specific legal advice to you. If you would like that, please call us at (916) 357-5660.