Unallocated Shares: What happens when company is sold?

[Lindsay]

The company is being sold with lots of UNallocated shares in the ESOP.  What happens to them?  Are they divided up among the participants?  Or does the new owners decide?  

[QDROphile]

Depends on the nature and terms of the sale transaction ,to start.

[ESOP Guy]

If management has on the ball advisors the amendments that terminate the plan cover this.   If they don't these discussion will start as soon as their TPA catches wind of the sale.  

It depends on if the shares are worth more than the loan that has them in suspense most of the time.  

Some of the shares will be used to payoff the loan by exchanging the shares for the note. 

If the shares are worth more than the loan most likely the excess will be allocated.  The next question is how.  Will it be treated like earnings and allocated on current value or like a contribution and allocated on current compensation?   All these decisions will have to be made and announced sooner or later.  

If the loan is worth more than the shares in suspense most likely the shares will not be allocated.  This is because 100% of the shares in suspense will be used to pay the loan.  

[QDROphile]

A "sale" of the company does not necessarily mean the ESOP terminates.