The Importance of the Repurchase Obligation in the Life of Your ESOP

An Employee Stock Ownership Plan (ESOP) is a qualified retirement plan that can be used as a business transition tool and as an employee ownership vehicle.

 The ESOP repurchase obligation or liability is the company’s obligation to buy back shares from ESOP participants according to the company’s ESOP plan document and ESOP Distribution Policy. The ESOP repurchase obligation helps with planning for cash requirements and how to meet bank (or seller) requirements for leveraged ESOPs.

Watch the video below to understand the importance of working with an Administration Provider that includes a repurchase obligation strategy as part of your ESOP road map and long-range planning.

ESOP Put Option

If company stock is not publicly traded a participant must be given a put option.  A put option gives the participant a right, but not the obligation, to require the company to repurchase the stock under a fair valuation formula as determined by an independent ESOP appraiser.

Employee Owned Company Sold Due to Upcoming Repurchase Obligation

The December 1, 2011 Employee Ownership Update is online and discusses the following:  

Keep Your ESOP On Track and On Time
12 Benefits of Incorporating an ESOP in your Business Exit Strategy

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