Main Street Employee Ownership Act Signed into Law
Kaufman & Canoles is pleased to announce that lawyers from the firms ESOPs and Employee Benefits Practice Group (Rick Mapp and Christopher McLean) served as subject matter professional to Senator Gillibrand’s staff in the development of the Main Street Employee Ownership Act. This law revamps the rules for Small Business Administration (SBA) lending to small businesses interested in converting to Employee Stock Ownership Plans (ESOP). The Main Street Employee Ownership Act was included in the FY-2019 National Defense Authorization Act (NDAA), and was signed into law in August.
Specifically, the Act (1) allows the SBA to make loans to companies that can then reloan to ESOPs (prior law only allowed loans made directly to ESOPs), (2) allows ESOP loans to be made under the SBA’s preferred lender program (a program providing for expediting the processing of loans with cooperating private lenders), and (3) updates the definition of ESOPs in the current law governing SBA loans so that ESOPs do not need to have full voting rights to qualify supporting the SBA in training and educating small business owners on the benefits of employee ownership.
The new law also directs the SBA to train and educate small business owners on the benefits of employee ownership.
ESOPs reward employees by sharing in the success of the company, creating an effective incentive for management and employees to perform well. Often, small businesses are the largest employers of local residents and the sole supporters of small economies. Employee ownership hedges the risk of displacing jobs from communities that rely on them most, and offers more Americans opportunities for equity participation and wealth creation.
Kaufman & Canoles Employee Benefits team has the distinction of extensive experience in structuring and counseling businesses in the establishment and maintenance of ESOPs. We provide feasibility analysis, counseling, document services, and compliance advice to help clients plan proactively for their ESOPs. Our team has closed more than 250 ESOP transactions, including new ESOP formations, mergers or other target acquisitions by ESOP companies and sell-side deals.
The contents of this publication are intended for general information only and should not be construed as legal advice or a legal opinion on specific facts and circumstances. Copyright 2023.