The company must provide adequate security and pay interest to the ESOP participant on the unpaid balance of an installment distribution. In a publicly-traded company employees may sell their distributed shares on the market. In a privately-held firm, the company must give the employees a put option on the stock for 60 days after the distribution. If the employee chooses not to sell at that time, the company must offer another put option for a second 60-day period starting one year after the distribution date. After this period, the company has no further obligation to repurchase the shares.
Several features make ESOPs unique as compared to other employee benefit plans.
First, the assets in an ESOP, which are primarily stock of the company, are held in a trust. So, as the company increases in value, the stock in the ESOP increases in value. On the other hand, if the value of the company decreases, then the stock in the ESOP also falls in value. Second, unlike other employee benefit plans, an ESOP may borrow money. In a leveraged ESOP, the ESOP or its corporate sponsor borrows money from a bank or other qualified lender.