Frequently Asked Questions

Employee Ownership FAQs

Common questions about employee stock ownership plans (ESOPs), employee ownership trusts (EOTs), and other forms of employee ownership, from the basics to technical topics.

This FAQ is written primarily for business owners, managers, and advisors involved in setting up or running an employee ownership plan. If you're an employee at an ESOP company looking to understand your own benefits and rights, see our articles on Working at an ESOP Company and The Rights of ESOP Participants.

NCEO employee ownership FAQ hero (keyboard)

Can a company sell shares in the ESOP to repay an ESOP loan?

If the company is sold or the plan is terminated, it clearly can. In the normal course of operations, selling shares out of the trust would be difficult. In some private letter rulings, companies have been allowed to do this in order to keep the plan functioning, such as in an economically driven restructuring, but selling shares otherwise would probably be seen by the IRS as an indication that the plan is not intended for the exclusive benefit of plan participants. The sale of these shares, arguably, prevents these participants from getting what is, in effect, a promised future benefit.

Link to this FAQ Topic: Financing an ESOP