Who runs the Company?

[Guest apl]

If a privately owned company decides to sell to an ESOP who runs the company if the owner sells:

1. 30% ?

2. 49% ?

3. Over 50% ?

4. Who appoints new president if original owner sells out? or how is this determined? Can employees vote in a new president or board if they own over 50% ?

[RLL]

As a general rule, the board of directors elects the president and other officers of a corporation. The shareholders elect the directors.

In most ESOPs of closely-held companies, the ESOP's shares are voted (for directors) by the ESOP trustee or by an administrative committee, although some ESOPs provide for the "pass-through" of voting rights to ESOP participants. The trustee and the committee are normally appointed by the board of directors. The provisions of the ESOP plan documents should specify the rules that apply in each situation.

Where an ESOP owns more than 50% of the outstanding shares of the corporation, whoever has voting power over the ESOP's shares can elect at least a majority of the directors. If an ESOP owns less than 50% of the outstanding shares, the ESOP shares may elect some of the directors only if the applicable state corporate law, or the corporate charter or bylaws, provide for "cumulative voting" for directors.

[This message has been edited by RLL (edited 12-06-1999).]