Lindsay Isaac
This June marked the one-year anniversary of The Download, a monthly NCEO member resource designed to help improve education and engagement at employee-owned companies. To commemorate, we've put together a "yearbook" to highlight the resources that have been distributed so far. The Download has covered a variety of topics in its first year, including the ESOP landscape, ESOP nuts and bolts, and ESOP culture.
Corey Rosen
When it became law in 2018, the Main Street Employee Ownership Act was widely seen as a boost to employee ownership by facilitating SBA financing, but so far, it has had only a minor impact, supporting the financing for fewer than a dozen ESOP transactions. The U.S. Small Business Administration (SBA) has issued procedural guidance (SBA Procedural Notice control no. 5000-858322, June 24, 2024) providing that a valuation done for an ESOP trustee to obtain a fair market value for shares purchased by the ESOP in a leveraged transaction using an SBA loan guarantee under the Main Street Employee Ownership Act of 2018 will satisfy the SBA's requirement for a valuation of the stock. Before this guidance was issued, SBA officers could and often did ask for a separate valuation to be performed following SBA standards. That meant companies would have two different valuations and correspondingly greater costs, and the transaction would take more time. There could also be fiduciary issues if the SBA valuation came in below the valuation for the trustee, while if the valuation came in higher, sellers might be less willing to do the deal.
Corey Rosen
A new bill in the North Carolina Senate would allow ESOP companies to qualify for state contracting preferences based on ownership by historically disadvantaged groups. Currently, ESOP-owned companies do not qualify for any contracting preferences in federal or state programs aimed at historically disadvantaged groups because the legal owner of the ESOP is a trust, not a qualifying individual or individuals.
Corey Rosen
Governor Jared Polis of Colorado has signed HB24-1157, a bill that provides statutory authority for the Colorado Employee Ownership Office, which Governor Polis created in 2020 through an executive order. The office provides technical assistance, coordinates with other agencies, and conducts outreach. The bill would make the office permanent and expand prior tax credits for the costs of converting to or expanding an employee ownership plan. The law provides a refundable tax credit for up to $50,000 of the costs of setting up an employee ownership plan, defined as an ESOP, employee ownership trust, worker cooperative, or equity grants or rights given directly to at least 20% of a company’s workforce where those workers hold 20% or more of the company’s fully diluted securities. Conversions to other qualified forms of employee ownership now also qualify for a credit of up to 50% of the costs, up to a maximum credit of $25,000. The law also provides a tax credit of 50% of the costs, up to a maximum credit of $25,000, for a qualified employee-owned business expanding its employee ownership stake by at least 20%.
NCEO
The next Is an ESOP Right for You? seminar is coming soon to Nashville, TN on July 29-30. This two-day event is designed for companies considering a transition to employee ownership. Over the course of two days, attendees will have the opportunity to meet with existing ESOP companies, expert service providers and staff from the NCEO and Employee Ownership Expansion Network (EOX) to learn more about employee ownership as a whole, the mechanics of setting up an ESOP including, feasibility, transaction structure, tax implications and more, as well as explore alternatives to an ESOP. The meeting will consist of both interactive roundtable discussions as well as presenter led content, with plenty of opportunities for Q&A.
Loren Rodgers
On April 30, 2024, Assistant Secretary of Labor Lisa M. Gomez spoke at the NCEO’s annual conference in Tampa, Florida. Assistant Secretary Gomez leads the Employee Benefits Security Administration (EBSA). As the head of EBSA, she is at the center of some of the most important decisions affecting ESOPs and employee ownership.
Corey Rosen
In the last three months, four lawsuits have been filed against ESOP companies for imprudently investing their cash assets in low-yield investments. These are the first lawsuits ever filed on this topic. The suits are at ESOP companies Aluminum Precision Products, Pride Mobility Products Corp., Aerotech Inc., and Wilson Electric Services Corp. and all were filed by the same law firm, Engstrom Lee.
Corey Rosen
Updated June 25, 2024
Liza Shifrin
At the 2024 NCEO Annual Conference earlier this month, one of the questions I heard most often from attendees was "where can I find state-specific ESOP information?" Whether you’re a current ESOP and looking to connect with other employee-owned companies in your state, or you’re ESOP-curious and searching for statistics on your state’s ESOP breakdown, the NCEO is here to help.
