Employee Buyout

Employee Buyout: Employee buyout is a state wherein a company’s control passes onto the employees in the form of share acquisition on an individual basis or trust. This usually happens at the time of closure. The price offered in a state of buyout is usually more than what the company management could get through selling of assets. At times, government controlled companies are also offered for buyout; especially when the closure is liable to cause massive unemployment.
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This is called a restructuring strategy and even the healthiest of the firms can proceed with this at no extra cost to their employees, offering them with company’s stock ownership. Shares that are allocated in this manner can be stored in an ESOP trust (Employee Stock Ownership Plan) until the employee plans to quit the company or duly retires. This kind of buyout plan is complete when ESOP are in the ownership of 51 percent or more of company’s shares.

Edited and Updated 15th February 2014

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