I work for Toyon Research Corporation, a small, employee-owned company. I am also one of the two trustees for Toyon’s Employee Stock Ownership Plan (ESOP), and several years ago I was one of seven directors on our company’s board, and may decide to serve again in the future. While, Toyon is a closed corporation, it is still subject to many of the same laws governing organizations with publically traded stock.
In fact, Toyon has experienced first-hand some of the difficulties big corporations face in abiding by the countless rules and regulations that they must conform to, including ERISA. For example, Toyon is currently undergoing a Department of Labor (DOL) audit of our ESOP plan, and I, as one of the Trustees, am also under their microscope. One of the major concerns of the DOL regarding closed corporations with ESOPs has to do with the company stock price and method of evaluation.
Publically traded organizations do not have to concern themselves with stock valuation because the market itself determines the valuation of the company. Toyon, on the other hand, must hire an outside evaluator, which costs anywhere from $10k to $20k per …show more content…
O’Hagan, however, the Supreme Court allowed an expansion of liability that it had avoided under Chiarella. In particular, it permitted the misallocation theory of liability as the basis for a 10b-5 violation when the defendant did not owe any fiduciary duty to the corporation whose securities the defendant traded. Essentially, the duty to disclose requirement of Texas Gulf Sulphur was found to be met if the defendant owed a fiduciary duty to a third-party, and breached that duty by making use of the inside information for his personal benefit. The theory of liability was therefore based on “a fiduciary’s undisclosed, self-serving use of a principal’s information to purchase and sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of that
In fact, Toyon has experienced first-hand some of the difficulties big corporations face in abiding by the countless rules and regulations that they must conform to, including ERISA. For example, Toyon is currently undergoing a Department of Labor (DOL) audit of our ESOP plan, and I, as one of the Trustees, am also under their microscope. One of the major concerns of the DOL regarding closed corporations with ESOPs has to do with the company stock price and method of evaluation.
Publically traded organizations do not have to concern themselves with stock valuation because the market itself determines the valuation of the company. Toyon, on the other hand, must hire an outside evaluator, which costs anywhere from $10k to $20k per …show more content…
O’Hagan, however, the Supreme Court allowed an expansion of liability that it had avoided under Chiarella. In particular, it permitted the misallocation theory of liability as the basis for a 10b-5 violation when the defendant did not owe any fiduciary duty to the corporation whose securities the defendant traded. Essentially, the duty to disclose requirement of Texas Gulf Sulphur was found to be met if the defendant owed a fiduciary duty to a third-party, and breached that duty by making use of the inside information for his personal benefit. The theory of liability was therefore based on “a fiduciary’s undisclosed, self-serving use of a principal’s information to purchase and sell securities, in breach of a duty of loyalty and confidentiality, defrauds the principal of the exclusive use of that