II 

115TH CONGRESS 

2D SESSION S. 2786 

To expand opportunities to available employee-owned business concerns 

through Small Business Administration loan programs, and for other 

purposes. 

IN THE SENATE OF THE UNITED STATES 

APRIL 26, 2018 

Mrs. GILLIBRAND (for herself, Mr. YOUNG, Mr. RISCH, Mrs. SHAHEEN, Mr. 

BOOKER, Ms. COLLINS, and Mr. CARDIN) introduced the following bill; 

which was read twice and referred to the Committee on Small Business 

and Entrepreneurship 

A BILL 

To expand opportunities to available employee-owned business concerns through Small Business Administration 

loan programs, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Main Street Employee 

5 Ownership Act of 2018’’. 

6 SEC. 2. DEFINITIONS. 

7 In this Act— 


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1 (1) the terms ‘‘Administration’’ and ‘‘Adminis2 trator’’ mean the Small Business Administration 

3 and the Administrator thereof, respectively; 

4 (2) the term ‘‘cooperative’’ has the meaning 

5 given the term in section 7(a)(35) of the Small Busi6 ness Act, as added by section 3; 

7 (3) the term ‘‘employee-owned business con8 cern’’ means— 

9 (A) a cooperative; and 

10 (B) a qualified employee trust; 

11 (4) the terms ‘‘qualified employee trust’’ and 

12 ‘‘small business concern’’ have the meanings given 

13 those terms in section 3 of the Small Business Act 

14 (15 U.S.C. 632), as amended by this Act; and 

15 (5) the term ‘‘small business development cen16 ter’’ means a small business development center de17 scribed in section 21 of the Small Business Act (15 

18 U.S.C. 648). 

19 SEC. 3. EXPANSION OF 7(A) LOANS. 

20 (a) IN GENERAL.—Section 7(a) of the Small Busi21 ness Act (15 U.S.C. 636(a)) is amended— 

22 (1) in paragraph (15)— 

23 (A) in subparagraph (A)— 


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1 (i) by striking ‘‘this subsection to 

2 qualified employee trusts’’ and inserting 

3 ‘‘this subsection— 

4 ‘‘(i) to qualified employee trusts’’; 

5 (ii) in clause (i), as so designated— 

6 (I) by inserting ‘‘, and for any 

7 transaction costs associated with pur8 chasing,’’ after ‘‘purchasing’’; and 

9 (II) by striking the period at the 

10 end and inserting ‘‘; and’’; and 

11 (iii) by adding at the end the fol12 lowing: 

13 ‘‘(ii) to a small business concern under a 

14 plan approved by the Administrator, if the pro15 ceeds from the loan are only used to make a 

16 loan to a qualified employee trust, and for any 

17 transaction costs associated with making that 

18 loan, that results in the qualified employee trust 

19 owning at least 51 percent of the small business 

20 concern.’’; 

21 (B) in subparagraph (B)— 

22 (i) in the matter preceding clause (i), 

23 by inserting ‘‘or by the small business con24 cern’’ after ‘‘the trustee of such trust’’; 


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1 (ii) in clause (ii), by striking ‘‘and’’ at 

2 the end; 

3 (iii) in clause (iii), by striking the pe4 riod at the end and inserting ‘‘, and’’; and 

5 (iv) by adding at the end the fol6 lowing: 

7 ‘‘(iv) with respect to a loan made to a 

8 trust, or to a cooperative in accordance with 

9 paragraph (35)— 

10 ‘‘(I) a seller of the small business con11 cern may remain involved as an officer, di12 rector, or key employee of the small busi13 ness concern when a qualified employee 

14 trust or cooperative has acquired 100 per15 cent of ownership of the small business 

16 concern; and 

17 ‘‘(II) any seller of the small business 

18 concern who remains as an owner of the 

19 small business concern, regardless of the 

20 percentage of ownership interest, shall be 

21 required to provide a personal guarantee 

22 by the Administration.’’; and 

23 (C) by adding at the end the following: 

24 ‘‘(F) A small business concern that makes a 

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1 graph (A)(ii) is not required to contain the same 

2 terms and conditions as the loan made to the small 

3 business concern that is guaranteed by the Adminis4 tration under such subparagraph. 

5 ‘‘(G) With respect to a loan made to a qualified 

6 employee trust under this paragraph, or to a cooper7 ative in accordance with paragraph (35), the Admin8 istrator may, as determined appropriate by the Ad9 ministrator, elect to not require any mandatory eq10 uity to be provided by the qualified employee trust 

11 or cooperative to make the loan.’’; and 

12 (2) by adding at the end the following: 

13 ‘‘(35) LOANS TO COOPERATIVES.— 

14 ‘‘(A) DEFINITION.—In this paragraph, the 

15 term ‘cooperative’ means an entity that is de16 termined to be a cooperative by the Adminis17 trator, in accordance with applicable Federal 

18 and State laws and regulations. 

19 ‘‘(B) AUTHORITY.—The Administration 

20 shall guarantee loans made to a cooperative for 

21 the purpose described in paragraph (15).’’. 

22 (b) DELEGATION OF AUTHORITY TO PREFERRED

23 LENDERS.—Section 5(b)(7) of the Small Business Act (15 

24 U.S.C. 634(b)(7)) is amended by inserting ‘‘, including 


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1 loans guaranteed under paragraph (15) or (35) of section 

2 7(a)’’ after ‘‘deferred participation loans’’. 

3 SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PRO4 GRAM OUTREACH. 

5 The Administrator shall provide outreach and edu6 cational materials to companies licensed under section 

7 301(c) of the Small Business Investment Act of 1958 (15 

8 U.S.C. 681(c)) to increase the use of funds to make invest9 ments in company transitions to employee-owned business 

10 concerns. 

11 SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUT12 REACH. 

13 The Administrator shall provide outreach and edu14 cational materials to intermediaries under section 7(m) of 

15 the Small Business Act (15 U.S.C. 636(m)) to increase 

16 the use of funds to make loans to employee-owned busi17 ness concerns, including transitions to employee-owned 

18 business concerns. 

19 SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUT20 REACH AND ASSISTANCE. 

21 (a) ESTABLISHMENT.—The Administrator shall es22 tablish a Small Business Employee Ownership and Co23 operatives Promotion Program to offer technical assist24 ance and training on the transition to employee ownership 

25 through cooperatives and qualified employee trusts. 


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1 (b) SMALL BUSINESS DEVELOPMENT CENTERS.— 

2 (1) IN GENERAL.—In carrying out the program 

3 established under subsection (a), the Administrator 

4 shall enter into agreements with small business de5 velopment centers under which the centers shall— 

6 (A) provide access to information and re7 sources on employee ownership through co8 operatives or qualified employee trusts as a 

9 business succession strategy; 

10 (B) conduct training and educational ac11 tivities; and 

12 (C) carry out the activities described in 

13 subparagraph (U) of section 21(c)(3) of the 

14 Small Business Act (15 U.S.C. 648(c)(3)). 

15 (2) ADDITIONAL SERVICES.—Section 21(c)(3) 

16 of the Small Business Act (15 U.S.C. 648(c)(3)) is 

17 amended— 

18 (A) in subparagraph (S), by striking 

19 ‘‘and’’ at the end; 

20 (B) in subparagraph (T), by striking the 

21 period at the end and inserting ‘‘; and’’; and 

22 (C) by adding at the end the following: 

23 ‘‘(U) encouraging and assisting the provi24 sion of succession planning to small business 

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1 operatives, as defined in section 7(a)(35), and 

2 qualified employee trusts (collectively referred 

3 to in this subparagraph as ‘employee-owned 

4 business concerns’), including by— 

5 ‘‘(i) providing training to individuals 

6 to promote the successful management, 

7 governance, or operation of a business pur8 chased by those individuals in the forma9 tion of an employee-owned business con10 cern; 

11 ‘‘(ii) assisting employee-owned busi12 ness concerns that meet applicable size 

13 standards established under section 3(a) 

14 with education and technical assistance 

15 with respect to financing and contracting 

16 programs administered by the Administra17 tion; 

18 ‘‘(iii) coordinating with lenders on 

19 conducting outreach on financing through 

20 programs administered by the Administra21 tion that may be used to support the tran22 sition of ownership to employees; 

23 ‘‘(iv) supporting small business con24 cerns in exploring or assessing the possiVerDate Sep 11 2014 23:00 May 04, 2018 Jkt 079200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S2786.IS S2786

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1 bility of transitioning to an employee2 owned business concern; and 

3 ‘‘(v) coordinating with the cooperative 

4 development centers of the Department of 

5 Agriculture, the land grant extension net6 work, the Manufacturing Extension Part7 nership, community development financial 

8 institutions, employee ownership associa9 tions and service providers, and local, re10 gional and national cooperative associa11 tions.’’. 

12 SEC. 7. INTERAGENCY WORKING GROUP. 

13 (a) IN GENERAL.—Not later than 90 days after the 

14 date of enactment of this Act, the Administrator or a des15 ignee of the Administrator shall coordinate and chair an 

16 interagency working group, which shall— 

17 (1) develop recommendations on how Federal 

18 programs can promote, support, and increase the 

19 number of employee-owned business concerns; 

20 (2) ensure coordination with Federal agencies 

21 and national and local employee ownership, coopera22 tive, and small business organizations; and 

23 (3) publish a report on the activities of the 

24 interagency working group that is indexed and main25 tained for public review. 


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1 (b) MEETINGS.—The interagency working group de2 scribed in subsection (a) shall meet in person or via elec3 tronic resources at such times as determined necessary by 

4 the Administrator, but not less frequently than biannually. 

5 SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS 

6 OF EMPLOYEE-OWNED FIRMS. 

7 Section 7(a)(15) of the Small Business Act (15 

8 U.S.C. 636(a)(15)), as amended by this Act, is amended— 

9 (1) in subparagraph (E), by striking ‘‘Adminis10 tration.’’ and inserting ‘‘Administration, which shall 

11 include— 

12 ‘‘(i) the total number of loans made to co13 operatives and qualified employee trusts (collec14 tively referred to in this subparagraph as ‘em15 ployee-owned business concerns’) that were 

16 guaranteed by the Administrator under this 

17 section or section 502 of the Small Business In18 vestment Act of 1958 (15 U.S.C. 696), includ19 ing the number of loans made— 

20 ‘‘(I) to small business concerns owned 

21 and controlled by socially and economically 

22 disadvantaged individuals; and 

23 ‘‘(II) to cooperatives; 

24 ‘‘(ii) the total number of financings made 

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1 nies licensed under section 301(c) of the Small 

2 Business Investment Act of 1958 (15 U.S.C. 

3 696(c)), including the number of financings 

4 made— 

5 ‘‘(I) to small business concerns owned 

6 and controlled by socially and economically 

7 disadvantaged individuals; and 

8 ‘‘(II) to cooperatives; and 

9 ‘‘(iii) any outreach and educational activi10 ties conducted by the Administration with re11 spect to employee-owned business concerns.’’; 

12 and 

13 (2) by adding at the end the following: 

14 ‘‘(H) In this paragraph— 

15 ‘‘(i) the term ‘cooperative’ has the meaning 

16 given the term in paragraph (35); and 

17 ‘‘(ii) the term ‘small business concern 

18 owned and controlled by socially and economi19 cally disadvantaged individuals’ has the mean20 ing given the term in section 8(d)(3)(C).’’. 

21 SEC. 9. REPORT ON COOPERATIVE LENDING. 

22 (a) SENSE OF CONGRESS.—It is the sense of Con23 gress that cooperatives have a unique business structure 

24 and are unable to access the lending programs of the Ad25 ministration effectively due to loan guarantee requireVerDate Sep 11 2014 23:00 May 04, 2018 Jkt 079200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S2786.IS S2786

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1 ments that are incompatible with the business structure 

2 of cooperatives. 

3 (b) STUDY AND REPORT.— 

4 (1) STUDY.—The Administrator, in coordina5 tion with lenders, stakeholders, and Federal agen6 cies, shall study and recommend practical alter7 natives for cooperatives that will satisfy the loan 

8 guarantee requirements of the Administration. 

9 (2) REPORT.—Not later than 120 days after 

10 the date of enactment of this Act, the Administrator 

11 shall submit to Congress the recommendations devel12 oped under paragraph (1) and a plan to implement 

13 those recommendations. 

14 SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EM15 PLOYEE TRUST. 

16 Section 3(c)(2)(A)(ii) of the Small Business Act (15 

17 U.S.C. 632(c)(2)(A)(ii)) is amended to read as follows: 

18 ‘‘(ii) which provides that each partici19 pant is entitled to direct the plan trustee 

20 as to the manner of how to vote the quali21 fied employer securities (as defined in sec22 tion 4975(e)(8) of the Internal Revenue 

23 Code of 1986), which are allocated to the 

24 account of such participant with respect to 

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1 ter) must be decided by a vote conducted 

2 in accordance with section 409(e) of the 

3 Internal Revenue Code of 1986; and’’. 

Æ 


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