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)

If a company is using the principal only method for releasing shares in a leveraged ESOP, but refinances the loan so that it extends more than 10 years, must it do a retroactive allocation of additional shares that would have been released had the principal only method been used?

The law is specific that the principal plus interest method (which releases more shares earlier on in the repayment) must be used only from the point of the refinancing forward. That does not mean that the company cannot or should not take steps to change prior allocations to try to make up for the slower allocations of shares that the principal only method created, however.

Link to this FAQ Topic: Financing an ESOP