American Ownership and Resilience Act
The American Ownership and Resilience Act would create a new domestic ownership investment facility within the Department of Commerce. The goal is to boost private funding for "covered investments"—primarily equity and financing that results in employee stock ownership plans (ESOPs) or eligible worker-owned cooperatives gaining majority control of a business. The Department would license and oversee special ownership investment companies (OICs) that would use private capital plus government leverage (potentially guaranteed by the federal government) to fund these transactions. The bill imposes strong governance and safeguards, including independent trustees and independent financial advisors, to protect employee beneficiaries and ensure fair financing terms. It also provides a mentoring pathway (Protege OIC program) to help new managers develop the track record needed to qualify for licensing. The program would have a sunset after the first license has been approved and operated for a substantial period (20 years from that date), with existing leveraged commitments allowed to continue but no new licenses after the sunset. In short, the act aims to expand domestic employee-ownership by channeling government-backed leverage to licensed investment firms that finance ESOPs and worker-owned cooperatives, while imposing strict governance, reporting, and capital requirements and ending new licenses after a defined period.
Key Points
- 1Creation of a federal facility to provide leverage (debt/guarantees) to licensed ownership investment companies that fund covered investments, with a total annual cap of $5 billion (no more than 20% to Protege OICs).
- 2Core concepts and safeguards:
- 3- “Covered investments” include financing that results in an ESOP or eligible worker-owned cooperative holding a majority of a firm’s stock, with protections such as independent trustees, fairness opinions, and voting rights procedures for ESOP participants.
- 4- Independent financial advisors and independent trustees must evaluate the fairness of proposed transactions; ESOP participants may influence or direct voting in certain matters.
- 5Protege OIC program to help new managers gain licensing eligibility:
- 6- Mentors may hold minority interests, and leveraging capacity for Protege OICs can be expanded for those managers.
- 7Licensing and oversight:
- 8- Rolling application process; stringent criteria including prior investment management experience or, for Protege OICs, retention of experienced advisors.
- 9- Provisional approvals may be granted for up to one year; fees may be charged to cover regulatory costs.
- 10- Requires minimum private capital of $10 million per licensee and diversification to ensure independence.
- 11Governance and structure:
- 12- Licensees can be 1940 Act Companies, 1980 Act Companies, or other entities allowed to be licensed; can convert to traditional registered investment company structures.
- 13- Licensees may borrow and issue securities, with potential Department guarantees, and debentures would be subordinate to other debt.
- 14- Provisions to avoid control of the covered business concern by the licensee; employee allocations and distributions in ESOP contexts are specified to protect employee participants.
- 15Reporting and transparency:
- 16- Annual reports from licensees (including Protege OICs) detailing ESOP vs. worker-owned investments, participant numbers, assets, contributions, distributions, and demographic data.
- 17Sunset and transition:
- 18- Sunset triggers: no new licenses after the first license is approved and the 20th calendar year after that approval begins.
- 19- Existing leveraged commitments may continue after the sunset; no new leverage commitments or licenses after the sunset.