SBA SOP Changes - Current Equity Holder staying on

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April 26, 2025

by a searcher from University of Rochester in Buffalo, NY, USA

I’m currently in discussions on a deal where there is a GM critical to the operations that I need to keep on post sale. Given he’s a long tenured employee, he currently has 10% equity, of which I’d need to buy him out given recent SBA SOP changes for partial ownership changes. However, I’m unclear if he can stay on as SOP also states that all equity holders can’t stay on post 12 months in an asset deal. Fortunately the company is C Corp, so would be an equity transaction but obviously the GM is critical to operations and unsure if equity transactions are exempt from the transition period for minority holders. Anyone have any insight into this?
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Reply by a professional
from University of Michigan in Detroit, MI, USA
Hi ^redacted‌, there is no requirement that you have to buy this employee out. And so long as he is good keeping his 10%, he won't have to PG the loan. Under the new SOPs, it's only the selling owner (the one who receives loan proceeds in exchange for selling) that needs to PG the loan in a partial change of ownership (notwithstanding the 20% rule). Feel free to reach out at redacted if you want to discuss further.
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Reply by a professional
from Harvard University in Durham, NC, USA
You are not required to buy out the employee under the new SOPs, and if he remains an owner then he isn't required to be out of the business within 12 months either. There could be additional complexities, though. DM me if you'd like to discuss.
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