Share release when amortization schedule "changes"

[mattmc82]

For sake of simplicity I will just use an example

1000 shares in suspense in 2017

Original amortization schedule is 20 payments of 160 (total payments of 3,200)

160/3,200 x 1000 = 50 shares released with $3,040 in remaining loan payments

Year 2018 the amortization schedule was updated by the valuation company and is 20 payments of 155 (total payments of 3,100)

should the 2017 share release be recalculated to reflect this updated amortization schedule? 

 

[ESOP Guy]

You are leaving a lot of facts out of your description and question. 

However, if the amortization used to compute the 2017 release wasn't an accurate amortization than the wrong number of shares were released.   That would be an operational failure.   The plan document and loan pledge agreement are going to require you to use an accurate amortization every year. 

If the company involved doesn't have lots of turnover in their employees the way you report the fix to the participants is to compute what everyone's balance should have been at the end of 2017 vs what was reported to them.  You make an adjustment to their 2018 balance for that difference as your first transaction to their accounts.  The sticky people will be the people who were fully paid out.   If that leaves you with people who were overpaid you have to correct for that.  Obviously, if people were underpaid that is easier to fix. 

[A Shot in the Dark]

Like ESOP Guy states, you are leaving many facts out of your post.

Appraisal/Valuation Companies don't change amortization schedules and loan note terms.  They report them, as they have substantial impact on the valuation of the company.

If you are the TPA, check with your client (or the other advisors to the ESOP transaction) to determine if perhaps the loan note terms were changed or amended thus altering the payment schedule.

If there was a mistake made, then follow ESOP Guy's advice.

[mattmc82]

thank you both. Confirmed my thoughts.