American Ownership and Resilience Act
The American Ownership and Resilience Act creates a new, government-backed framework to promote domestic ownership succession through specialized investment entities called Ownership Investment Companies (OICs). The core idea is to provide leverage (debt) and regulatory structure to finance and support employee ownership plans (ESOPs) and eligible worker-owned cooperatives that gain a majority stake in their companies. The Department of Commerce would license and supervise these OICs, with ongoing reporting, governance safeguards, and limits on leverage. A separate Protege OIC program would mentor newer managers to qualify for licensing. Key design features include a cap on annual leverage ($5 billion, with no more than 20% to Protege OICs), a minimum private capital requirement, independent trustees and financial advisors for ESOP transactions, fairness opinions, and protections to ensure employees have a voice in major ownership decisions. The act also envisions a sunset after the first license has been approved for the facility, after which no new licenses could be issued (though existing licensees could continue under previously committed leverage). It further contemplates that some existing 1940 Act and 1980 Act investment firms may participate or convert to the new framework, with related tax and regulatory considerations.
Key Points
- 1Purpose and structure
- 2- Establishes a domestic Ownership Investment Facility to provide leverage to licensed Ownership Investment Companies (OICs) to support covered investments, primarily ESOPs and eligible worker-owned cooperatives that achieve majority ownership.
- 3- Defines key terms (e.g., covered investment, ESOP, Protege OIC, independent trustee, private capital) and requires a structured licensing regime overseen by the Secretary of Commerce.
- 4Leverage and financing
- 5- The Secretary may provide leverage to licensed OICs, but total leverage may not exceed $5 billion in a fiscal year, with no more than 20% of that total going to Protege OICs.
- 6- The Department may guarantee timely payment of principal and interest on certain debentures issued by OICs, subject to regulations and appropriations, with the U.S. government’s full faith and credit backing.
- 7Protege OIC program
- 8- Creates a program allowing experienced managers to guide Protege OICs in applying for licenses and managing investments.
- 9- Protege OICs can receive enhanced leverage capacity via certain increases tied to the manager’s stake in the Protege arrangement.
- 10ESOPs, worker-owned co-ops, and governance protections
- 11- Financing can support ESOPs or eligible worker-owned cooperatives that hold a majority interest after the investment, with requirements for independent trustees and fairness opinions.
- 12- Independent trustees and independent financial advisors must meet strict independence criteria to prevent conflicts of interest.
- 13- Where ESOPs are involved, there are voting rights provisions and procedures to ensure participants have a voice in major stock transactions, along with protections for allocated vs. unallocated shares.
- 14Management, licensing, and capital requirements
- 15- OICs must be organized under state law (corporation, LLC, or limited partnership) with long-term succession and governance provisions.
- 16- Minimum private capital per licensee is $10 million, plus ongoing scrutiny of financial soundness and ability to service debt.
- 17- Licensing process is on a rolling basis, with clear criteria and timelines, including evaluation of track record, advisory arrangements, and independence from parties with potential conflicts.
- 18Protections and oversight
- 19- Requires independence between managers, licensees, and the ownership to ensure objective financial management.
- 20- Detailed reporting to the Secretary (annual reports with ESOP/worker-owned metrics, participant data, demographics, and financials).
- 21- Independent trustees must be appointed for ESOP transactions, with fairness opinions to assess the financial fairness of deals.
- 22Implementation timeline and sunset
- 23- Policy milestones: applications to license accepted within 540 days; first licenses issued within two years of enactment.
- 24- Sunset: no new licenses after the first day of the 20th calendar year following the initial license approval; existing licensed entities may continue leveraging commitments made before the sunset.
- 251940 Act and 1980 Act Companies
- 26- Current 1940 Act Companies or 1980 Act Companies can apply to participate and may convert to the new framework; they may elect to be taxed as a regulated investment company under specific IRS provisions.