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 shares are distributed under an ESOP a few months after the most recent appraisal, is a new appraisal needed?

Plans typically state that distribution will occur at the most recent valuation price. That could mean relying on a valuation that is as much as one year old. This can become an issue if there is reason to believe that there has been a substantial change in the company's value in the interim. If that is the case, it may be prudent to have an interim valuation done. The trustee needs to be involved in this decision. For instance, during COVID some companies had reason to believe that their stock value would drop significantly or even dramatically. If they had to pay out at the valuation based on a pre-COVID price, and there were significant diversifications or distributions, that could put the company in significant financial jeopardy and be detrimental to the remaining ESOP participants. As a result, some companies did interim valuations. The reverse could also be true if there has been a dramatic increase in the company's stock price. These interim valuations, however, do need approval by the trustee and are relatively uncommon.

Link to this FAQ Topic: ESOP Valuation