A 5016 — Establishes program in EDA to encourage employee ownership awareness and provide funding and advisory support.

          d.   d.   (1)  No more than five contractors shall be designated as eligible contractors authorized to provide employee ownership feasibility study services pursuant to the provisions of the program at any time.

          (2)  (2) Any contractor that the authority has authorized to provide employee ownership feasibility study services prior to the effective date of P.L.    , c.    (C.        ) (pending before the Legislature as this bill) shall be deemed an eligible contractor under the program.

       5.   1[5. a.  The authority shall designate an employee of the authority or appoint a qualified individual to serve as the Director of Employee Ownership.  The director shall report to the Chief Executive Officer of the authority.

a.  The authority shall designate an employee of the authority or appoint a qualified individual to serve as the Director of Employee Ownership.  The director shall report to the Chief Executive Officer of the authority.

     c.    c.    The director shall be responsible for:

     (1)  (1)  administering the Employee Ownership Transition Program established pursuant to section 2 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill);

     (2)  (2)  serving as the State’s liaison for the implementation of employee ownership models, including coordinating among businesses, lenders, professional advisors, labor organizations, and employee ownership resource organizations;

     (3)  (3)  supplementing the program through the use of any other financial tools and products made available by the authority for employee ownership, business retention, succession, and wealth-building;

     (4)  (4)  developing and implementing strategies to increase awareness of employee ownership models among business owners, employees, and community stakeholders;

and      (5)  (5)  advising the authority and the Advisory Commission on Employee Ownership, established pursuant to section 6 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill), on any proposed changes to the program deemed necessary to expand the number of, and diversity of, employee-owned businesses in the State.State.]1         1[6.] 5.1    a.  1[There is established in, but not of, the authority,] The authority shall establish1 an Advisory 1[Commission] Committee1 on Employee Ownership.  1[The commission shall be advisory to the authority and the Director of Employee Ownership designated pursuant to section 5 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).]1       b.   The 1[commission] committee may call upon other State entities within the executive branch for guidance and expertise and1 shall consist of 1[13] nine1 members 1[, as follows] selected by the authority, which shall include1:

           (1) 6.   1[the a. Chief ThereExecutive isOfficer establishedof in, but not of, the authority, anor Advisorythe Commissionchief onexecutive Employeeofficer’s Ownership. designee, Thewho commission shall beserve advisoryex toofficio; the authority and the Director of Employee Ownership designated pursuant to section 5 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).

          b.   (2) Thethe commissionCommissioner shallof consistLabor ofand 13Workforce members,Development, asor follows:the commissioner’s designee, who shall serve ex officio;

          (1)  (3) the ChiefState ExecutiveTreasurer, Officer of the authority, or the chiefState executiveTreasurer’s officer’s designee, who shall serve ex officio;

    and (2)        the(4) Commissioner10 ofpublic Labormembers, andwho Workforceshall Development,be orappointed by the commissioner’sGovernor, designee,and who shall serveinclude: ex officio;

          (3)  (a)]1  theone representative of Rutgers, The State Treasurer,University orof New Jersey, from the StateInstitute Treasurer’sfor designee,the whoStudy shallof serveEmployee exOwnership officio;and Profit Sharing;

and          1[(b)] (4)  (2)1  10one publicrepresentative members,of the New Jersey/New York Center for Employee Ownership, who shall be appointed byupon the Governor,recommendation andof shallthe include:Executive Director of the New Jersey/New York Center for Employee Ownership;

          (a)  1[(c)] (3)1  one representativeexecutive ofofficer Rutgers, The State University of Newan Jersey,employee‑owned frombusiness thelocated Institutein forthis theState; Study of Employee Ownership and Profit Sharing;

          (b)  1[(d)] (4)1  one representativeemployee of thean Newemployee-owned Jersey/Newbusiness Yorkin Center for Employee Ownership, who shall be appointed upon the recommendationState; of the Executive Director of the New Jersey/New York Center for Employee Ownership;

          (c)  1[(e)] (5)1  one executiverepresentative officer of ana employee‑ownedlabor businessorganization; located in this State;

          (d)  1[(f)] (6)1  one employeerepresentative of ana employee-ownedfinancial businessinstitution inor thefund State;that finances employee ownership transitions;

          (e)  1[(g)] (7)1  one representativeindividual ofwho serves or has served as a laborfiduciary organization;or trustee for an employee stock ownership plan or employee ownership trust;

          (f)  1[(h)] (8)1  one representativeprofessional of1financial1 aadvisor financialwith institutionexperience orin fundemployee thatownership financestransitions, employeeincluding ownershiptransitions transitions;to cooperative or trust structures;

    and (g)        one1[(i)] individual(9)1  who1[two servespublic ormembers] hasone servedindividual1 aswith aexpertise fiduciaryin oreconomic trusteedevelopment, for an employee stockownership, ownershipcommunity planwealth‑building, or employeesmall ownershipbusiness trust;assistance.

          (h)  c.   one1[The professionalpublic advisormembers withshall experienceserve for terms of four years, except that of the first members appointed, three shall be appointed for a term of two years, three shall be appointed for a term of three years, and four shall be appointed for a term of four years.  Each member shall serve until a successor has been appointed and qualified, and vacancies shall be filled in employeethe ownershipsame transitions,manner includingas transitionsthe tooriginal cooperativeappointments orfor trustthe structures;remainder of the unexpired term.  A public member shall be eligible for reappointment to the commission.

      d.   The commission shall meet at least four times each year.  The members of the commission shall select a chair and     vice-chair (i)   from twoamong publicthe members withthereof.  expertiseSeven members of the commission shall constitute a quorum at any meeting thereof.  No vacancy in economicthe development,membership employeeof ownership,the communitycommission wealth‑building,shall orimpair smallthe businessright assistance.of a quorum of the members to exercise all the powers and perform all the duties of the commission.

          c.    e.]1            The public1[commission] memberscommittee1 shallshall: serve for terms of four years, except that of the first members appointed, three shall be appointed for a term of two years, three shall be appointed for a term of three years, and four shall be appointed for a term of four years.  Each member shall serve until a successor has been appointed and qualified, and vacancies shall be filled in the same manner as the original appointments for the remainder of the unexpired term.  A public member shall be eligible for reappointment to the commission.

          d.   (1) Theadvise commission shall meet at least four times each year.  The members of the commissionauthority shall1[and select a chair and vice-chair from among the membersDirector thereof.  Seven members of theEmployee commissionOwnership]1 shallon constitutestrategies ato quorumexpand atemployee anyownership meetingmodels thereof.  No vacancy in the membershipState; of the commission shall impair the right of a quorum of the members to exercise all the powers and perform all the duties of the commission.

and      e.    (2)  Themake commissionrecommendations shall:regarding program design, outreach, and metrics for success, including the use of financial tools to encourage employee ownership transitions.

       (1)  1[7.]  advise6.1    thea.  The authority shall establish and themaintain Directora offund, Employeeknown as the “Employee Ownership onAssistance strategiesFund,” to expandsupport employeethe ownershippurposes modelsof inP.L.    , c.    (C.        ) (pending before the State;Legislature as this bill), including the provision of:

and      (2)  (1)  makefinancial recommendationsassistance regardingto programdefray design,the outreach,costs andof metricsemployee forownership success,feasibility includingstudy theservices useconducted ofby financialeligible toolscontractors pursuant to encouragesection employee3 ownershipof transitions.P.L.    , c.    (C.        ) (pending before the Legislature as this bill);

 and      7.   (2)  a. education, Theoutreach, authority shall establish and maintaintechnical aassistance fund,to knownbusinesses asin theaccordance “Employeewith Ownership Assistance Fund,” to support the purposes ofset P.L.    ,forth c.    (C.       in )subsection (pendinga. before the Legislature as this bill), including the provision of:

     (1)   financial assistance to defray the costs of employee ownership feasibility study services conducted by eligible contractors pursuant to section 3 of P.L.    , c.    (C.        ) (pending before the Legislature as this bill);

and      (2)   education, outreach, and technical assistance to businesses in accordance with the purposes set forth in subsection a.

     (1)  (1)  such monies as may be appropriated or made available to the authority for the purpose of the fund;

and      (2)  (2)  any return on investment of monies deposited in the fund.

            8.   1[8.] 7.1    a.  The authority shall establish and maintain a non-lapsing revolving fund, to be known as the "Employee Ownership Revolving Loan Fund," that shall serve as the repository of all monies used by the authority to provide loans pursuant to this section.

          b.   b.   The revolving loan fund shall be credited with:

          (1)  (1) such monies as are appropriated to the authority for deposit into the revolving loan fund;

          (2)  (2) such monies as are made available to the authority from the federal government or any other public source for deposit into the revolving loan fund;

          (3)  (3) any monies received by the authority as a gift, grant, donation, bequest, or other contribution from private or philanthropic sources for the purposes of the revolving loan fund;

          (4)  (4) any monies transferred to the revolving loan fund by the authority from any other fund or account of the authority, as authorized by law;

          (5)  (5) any return on investment of monies deposited into the revolving loan fund;

and           (6)  (6) any monies received by the authority from the repayment of principal and interest, or other amounts received in connection with low-interest loans made from the revolving loan fund pursuant to this section.

          c.    c.   The authority shall issue low-interest loans from the revolving loan fund to eligible businesses, participating businesses, and any other entities determined to be appropriate by the authority, for the purpose of facilitating:

          (1)  (1) a majority employee ownership transition;

and           (2)  (2) reasonable transaction-related and post-transition needs that support the long-term sustainability of an employee-owned business, as determined by the authority.

          d.   d.   An eligible business, participating business, or other entity authorized by the authority shall submit an application for a low-interest loan to the authority in a form and manner as prescribed by the authority. authority 1, following the completion of employee ownership feasibility study services1.  Upon approval of the application, the authority shall enter into a loan agreement with the eligible business, participating business, or other authorized entity, as the case may be, which loan agreement shall include, but not be limited to, the following:  underwriting criteria;

          e.    e.   The authority may use no more than five percent of the total amount of interest or other charges received each year in connection with loans issued pursuant to this section to offset the administrative costs of operating the revolving loan fund.

            9.   1[9.] The8.1    1[The New Jersey Economic Development Authority shall adopt, pursuant toto] Notwithstanding any provision of1 the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.),seq.) 1to the contrary, the chief executive officer of the authority may adopt, immediately upon filing with the Office of Administrative Law1, rules and regulations consistent with the purposes of P.L.    , c.    (C.        ) (pending before the Legislature as this bill).bill).  1The rules and regulations adopted pursuant to this section shall be effective for a period not to exceed 365 days following the date of filing and may thereafter be amended, adopted, or readopted in accordance with the requirements of P.L.1968, c.410 (C.52:14B-1 et seq.).1        1[10.]  9.1    This act shall take effect immediately.

       10.  This act shall take effect immediately.

    STATEMENT        This bill requires the New Jersey Economic Development Authority (EDA) to establish an “Employee Ownership Transition Program” (program) to provide financial assistance and educational resources to encourage businesses to explore transitioning their ownership structure to an employee ownership model and to provide educational resources to businesses about employee ownership models.  Additionally, this bill requires the EDA to designate a Director of Employee Ownership to administer the program and to establish an Advisory Commission on Employee Ownership to advise the EDA on strategies to encourage and expand employee ownership in the State.

  Employee Ownership Transition Program      The purpose of the program would be to encourage businesses to explore transitioning to employee ownership models and provide educational resources about employee ownership models.  The bill defines “employee ownership model” to mean an arrangement in which a business’s employees own shares in the business or the right to the value of shares in the business.  Employee ownership models include, but are not limited to:  employee stock ownership plans;

worker cooperatives;

employee ownership trusts;

direct employee ownership;

stock options;

stock grants;

synthetic equity;

and any other broad-based employee ownership structure.

     Under the program, the EDA would provide the following services:  (1) financial assistance to support the payment of eligible contractors for the provision of employee ownership feasibility study services for eligible businesses;

(2) consultative services to businesses that have elected to transition to an employee ownership model following the completion of a feasibility study;

(3) information and educational services and resources about employee ownership models for employees and employers, made available on the EDA’s Internet website;

(4) outreach services to businesses, in partnership with educational institutions concerning the advantages and implementation of employee ownership models generally;

(5) encouragement of businesses in this State to consider and transition to employee stock ownership plans and other variations of employee ownership models;

(6) educational services, outreach services, and early-stage technical assistance concerning employee ownership models to businesses, including small or start-up business with fewer than 20 full-time employees that may be years away from a succession decision, to help such businesses proactively incorporate employee ownership into their growth and succession planning;

and (7) loan financing and other financial tools to support employee ownership transitions, including through the Employee Ownership Revolving Loan Fund established under the bill.

     A contractor that seeks to provide employee ownership feasibility study services under the program would be required to apply to the EDA to participate in the program.  As part of its application, an applicant would be required to provide:  (1) proof that the applicant is experienced in employee ownership transitions;

(2) evidence regarding the qualifications and experience of the applicant in designing and developing feasibility studies and valuations;

and (3) information regarding the ability of the contractor to complete the scope of work expected for employee ownership feasibility study services under the program.  Upon approval of an application, the EDA would enter into a contract with the contractor to provide employee ownership feasibility study services for eligible businesses under the program.

     Under the program, an eligible business may apply to the EDA for assistance in defraying the costs of employee ownership feasibility study services.  Employee ownership feasibility study services are defined under the bill to include an in-depth, written assessment of the business’s potential and viable outcomes in transitioning to an employee ownership model, informed by the business owner’s desired objectives in exploring an employee ownership model, based on certain measures listed in the bill.

     Upon approval of an application, the EDA would notify the eligible business and facilitate communication between the eligible business and an eligible contractor.  As part of this initial coordination, the EDA would require that the eligible business and eligible contractor conduct at least one meeting to discuss the characteristics of the eligible business and the objectives of the employee ownership feasibility study services.  After this meeting, the eligible contractor would provide the EDA and the eligible business with an itemized electronic invoice for employee ownership feasibility study services to be completed.

     Prior to the EDA, eligible business, and eligible contractor entering into a written agreement for employee ownership feasibility study services, the EDA would be required to certify the amount of financial assistance to be paid by the EDA to the eligible contractor and the amount of the payment to be paid by the eligible business.  Under the program, the EDA would provide financial assistance to the eligible contractor in an amount equal to the lesser of 90 percent of the pre-approved services costs of the employee ownership feasibility study services or $35,000.

     For purposes of supporting the program, the EDA would be required to establish and maintain the “Employee Ownership Assistance Fund.”  The EDA is required to maintain the fund to support the program, including the provision of financial assistance to defray the costs of employee ownership feasibility study services conducted by eligible contractors and the provision of education, outreach, and technical assistance to businesses in accordance with the purposes set forth in the bill.  This fund would be credited with such monies as may be appropriated or made available to the EDA for the purpose of the fund and any return on investment of monies deposited in the fund.

     Currently, the EDA administers the “Employee Stock Ownership Plan Assistance Program” that provides partially covered employee stock ownership plan feasibility study services for New Jersey businesses that are interested in transitioning to employee-owned businesses.  This bill seeks to codify and expand this program.  Additionally, under this bill, any eligible contractors that are approved under the existing program would automatically qualify as eligible contractors for the “Employee Ownership Transition Program.”   Director of Employee Ownership      The bill requires the EDA to designate an employee of the authority or appoint a qualified individual to serve as the Director of Employee Ownership, who would report directly to the Chief Executive Officer of the EDA.  Qualifications for the role of director include training or experience in employee ownership, business succession planning, economic development, workforce development, or corporate finance.

     The director would be responsible for administering the Employee Ownership Transition Program established by this bill.  The director would be required to:  (1) administer the program;

(2) serve as the State’s liaison for implementing employee ownership models, including coordinating with businesses, lenders, professional advisors, labor organizations, and employee ownership resource organizations;

(3) supplement the program through the use of any other financial tools and products made available by the EDA for employee ownership, business retention, succession, and wealth-building;

(4) develop and implement strategies to increase awareness of employee ownership models among business owners, employees, and community stakeholders;

and (5) advise the EDA and the Advisory Commission on Employee Ownership, also established under the bill, of any proposed changes to the program that would be necessary to expand the number of, and diversity of, employee-owned businesses in the State.

  Advisory Commission on Employee Ownership      The bill establishes an Advisory Commission on Employee Ownership.  The commission would be advisory to the EDA and the Director of Employee Ownership, also established under the bill.

     The commission would be required to advise the EDA and the Director of Employee Ownership on strategies to expand employee ownership models in the State and make recommendations regarding program design, outreach, and metrics for success, including the use of financial tools to encourage employee ownership transitions.

     The commission would consist of 13 members, as follows:  (1) the Chief Executive Officer of the EDA, or the chief executive officer’s designee;

(2) the Commissioner of Labor and Workforce Development, or the commissioner’s designee;

(3) the State Treasurer, or the State Treasurer’s designee;

and (4) 10 public members, who would be appointed by the Governor.

     The 10 public members of the commission would consist of:  (1) one representative of Rutgers, The State University of New Jersey, from the Institute for the Study of Employee Ownership and Profit Sharing;

(2) one representative of the New Jersey/New York Center for Employee Ownership, who would be appointed upon the recommendation of the Executive Director of the New Jersey/New York Center for Employee Ownership;

(3) one executive officer of an employee‑owned business located in this State;

(4) one employee of an employee-owned business in the State;

(5) one representative of a labor organization;

(6) one representative of a financial institution or fund that finances employee ownership transitions;

(7) one individual who serves or has served as a fiduciary or trustee for an employee stock ownership plan or employee ownership trust;

(8) one professional advisor with experience in employee ownership transitions, including transitions to cooperative or trust structures;

and (9) two public members with expertise in economic development, employee ownership, community wealth‑building, or small business assistance.

     Under the bill, the commission would be required to meet at least four times each year.  A chair and vice-chair would be selected by the members of the commission from among its members.  Seven members would constitute a quorum for purposes of transacting business, regardless of any vacancy on the commission.  Under the bill, a public member would be appointed to the commission for four years, except that of the first members appointed, three would be appointed for a term of two years, three would be appointed for a term of three years, and four would be appointed for a term of four years.  Public members would be appointed by the Governor with the advice and consent of the Senate and would be eligible for reappointment.

  Employee Ownership Revolving Loan Fund      The bill requires the EDA to establish a non-lapsing revolving loan fund, to be known as the “Employee Ownership Revolving Loan Fund,” to provide low-interest loans to support employee ownership transitions.

     Under the bill, the EDA may issue low-interest loans from the revolving loan fund to eligible businesses, participating businesses, and any other entities determined to be appropriate by the EDA, for the purpose of facilitating:  (1) majority employee ownership transitions;

and (2) reasonable transaction-related and post-transition needs that support the long-term sustainability of an employee-owned business.  An eligible business, participating business, or other entity authorized by the EDA would be required to submit an application for a low-interest loan to the EDA and, upon approval of this application, enter into a loan agreement with the EDA.  This loan agreement would include the following terms:  underwriting criteria;

maximum loan amounts;

interest rates;

repayment terms;

permitted uses of proceeds;

and any reporting requirements determined by the EDA.

     Under the bill, the revolving loan fund may be credited with monies received by the EDA from various sources, including State appropriations, federal funds, charitable contributions, internal transfers, and investment returns.

     The bill also provides that the EDA may use no more than five percent of the total amount of interest or other charges received each year in connection with issued loans to offset the administrative costs of operating the revolving loan fund.