Assembly Commerce and Economic Development Committee Statement to Assembly, No. 5016, Dated June 4, 2026

Summary

Statement of the Assembly Commerce and Economic Development Committee of the State of New Jersey, dated June 4, 2026, reporting Assembly Bill 5016 favorably. The bill requires the New Jersey Economic Development Authority to establish an Employee Ownership Transition Program offering financial assistance, educational resources and loan financing to businesses considering employee ownership models such as employee stock ownership plans, worker cooperatives and employee ownership trusts. The authority would pay eligible contractors the lesser of 90 percent of pre-approved feasibility study costs or $35,000 from an Employee Ownership Assistance Fund. The bill also creates a Director of Employee Ownership, a 13-member Advisory Commission on Employee Ownership and an Employee Ownership Revolving Loan Fund for low-interest loans.
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ASSEMBLY COMMERCE AND ECONOMIC DEVELOPMENT COMMITTEE

STATEMENT TO

ASSEMBLY,
No. 5016

STATE
OF NEW JERSEY

DATED: JUNE 4,
2026

The Assembly Commerce and Economic Development
Committee reports favorably Assembly Bill No. 5016.

As reported, this bill requires the New Jersey
Economic Development Authority (EDA) to establish an “Employee Ownership
Transition Program” (program) to provide financial assistance and educational
resources to encourage businesses to explore transitioning their ownership
structure to an employee ownership model and to provide educational resources
to businesses about employee ownership models. Additionally, this bill
requires the EDA to designate a Director of Employee Ownership to administer
the program and to establish an Advisory Commission on Employee Ownership to
advise the EDA on strategies to encourage and expand employee ownership in the
State.

Employee Ownership Transition Program

The purpose of the program would be to encourage
businesses to explore transitioning to employee ownership models and provide
educational resources about employee ownership models. The bill defines
“employee ownership model” to mean an arrangement in which a business’s
employees own shares in the business or the right to the value of shares in the
business. Employee ownership models include, but are not limited to: employee
stock ownership plans; worker cooperatives; employee ownership trusts; direct
employee ownership; stock options; stock grants; synthetic equity; and any
other broad-based employee ownership structure.

Under the program, the EDA would provide the following
services: (1) financial assistance to support the payment of eligible
contractors for the provision of employee ownership feasibility study services
for eligible businesses; (2) consultative services to businesses that have
elected to transition to an employee ownership model following the completion
of a feasibility study; (3) information and educational services and resources
about employee ownership models for employees and employers, made available on
the EDA’s Internet website; (4) outreach services to businesses, in partnership
with educational institutions concerning the advantages and implementation of
employee ownership models generally; (5) encouragement of businesses in this
State to consider and transition to employee stock ownership plans and other
variations of employee ownership models; (6) educational services, outreach
services, and early-stage technical assistance concerning employee ownership
models to businesses, including small or start-up business with fewer than 20
full-time employees that may be years away from a succession decision, to help
such businesses proactively incorporate employee ownership into their growth
and succession planning; and (7) loan financing and other financial tools to
support employee ownership transitions, including through the Employee
Ownership Revolving Loan Fund established under the bill.

A contractor that seeks to provide employee ownership
feasibility study services under the program would be required to apply to the
EDA to participate in the program. As part of its application, an applicant
would be required to provide: (1) proof that the applicant is experienced in
employee ownership transitions; (2) evidence regarding the qualifications and
experience of the applicant in designing and developing feasibility studies and
valuations; and (3) information regarding the ability of the contractor to
complete the scope of work expected for employee ownership feasibility study
services under the program. Upon approval of an application, the EDA would
enter into a contract with the contractor to provide employee ownership
feasibility study services for eligible businesses under the program.

Under the program, an eligible business may apply to
the EDA for assistance in defraying the costs of employee ownership feasibility
study services. Employee ownership feasibility study services are defined
under the bill to include an in-depth, written assessment of the business’s
potential and viable outcomes in transitioning to an employee ownership model,
informed by the business owner’s desired objectives in exploring an employee
ownership model, based on certain measures listed in the bill.

Upon approval of an application, the EDA would notify
the eligible business and facilitate communication between the eligible
business and an eligible contractor. As part of this initial coordination, the
EDA would require that the eligible business and eligible contractor conduct at
least one meeting to discuss the characteristics of the eligible business and
the objectives of the employee ownership feasibility study services. After
this meeting, the eligible contractor would provide the EDA and the eligible
business with an itemized electronic invoice for employee ownership feasibility
study services to be completed.

Prior to the EDA, eligible business, and eligible
contractor entering into a written agreement for employee ownership feasibility
study services, the EDA would be required to certify the amount of financial
assistance to be paid by the EDA to the eligible contractor and the amount of
the payment to be paid by the eligible business. Under the program, the EDA
would provide financial assistance to the eligible contractor in an amount
equal to the lesser of 90 percent of the pre-approved services costs of the
employee ownership feasibility study services or $35,000.

For purposes of supporting the program, the EDA would
be required to establish and maintain the “Employee Ownership Assistance
Fund.” The EDA is required to maintain the fund to support the program,
including the provision of financial assistance to defray the costs of employee
ownership feasibility study services conducted by eligible contractors and the
provision of education, outreach, and technical assistance to businesses in
accordance with the purposes set forth in the bill. This fund would be credited
with such monies as may be appropriated or made available to the EDA for the
purpose of the fund and any return on investment of monies deposited in the
fund.

Currently, the EDA administers the “Employee Stock
Ownership Plan Assistance Program” that provides partially covered employee
stock ownership plan feasibility study services for New Jersey businesses that
are interested in transitioning to employee-owned businesses. This bill seeks
to codify and expand this program. Additionally, under this bill, any eligible
contractors that are approved under the existing program would automatically
qualify as eligible contractors for the “Employee Ownership Transition
Program.”

Director of Employee Ownership

The bill requires the EDA to designate an employee of
the authority or appoint a qualified individual to serve as the Director of
Employee Ownership, who would report directly to the Chief Executive Officer of
the EDA. Qualifications for the role of director include training or
experience in employee ownership, business succession planning, economic
development, workforce development, or corporate finance.

The director would be responsible for administering
the Employee Ownership Transition Program established by this bill. The
director would be required to: (1) administer the program; (2) serve as the
State’s liaison for implementing employee ownership models, including
coordinating with businesses, lenders, professional advisors, labor
organizations, and employee ownership resource organizations; (3) supplement
the program through the use of any other financial tools and products made
available by the EDA for employee ownership, business retention, succession,
and wealth-building; (4) develop and implement strategies to increase awareness
of employee ownership models among business owners, employees, and community
stakeholders; and (5) advise the EDA and the Advisory Commission on Employee
Ownership, also established under the bill, of any proposed changes to the
program that would be necessary to expand the number of, and diversity of,
employee-owned businesses in the State.

Advisory Commission on Employee Ownership

The bill establishes an Advisory Commission on
Employee Ownership. The commission would be advisory to the EDA and the
Director of Employee Ownership, also established under the bill.

The commission would be required to advise the EDA and
the Director of Employee Ownership on strategies to expand employee ownership
models in the State and make recommendations regarding program design,
outreach, and metrics for success, including the use of financial tools to
encourage employee ownership transitions.

The commission would consist of 13 members, as
follows: (1) the Chief Executive Officer of the EDA, or the chief executive
officer’s designee; (2) the Commissioner of Labor and Workforce Development, or
the commissioner’s designee; (3) the State Treasurer, or the State Treasurer’s
designee; and (4) 10 public members, who would be appointed by the Governor.

The 10 public members of the commission would consist
of: (1) one representative of Rutgers, The State University of New Jersey,
from the Institute for the Study of Employee Ownership and Profit Sharing; (2)
one representative of the New Jersey/New York Center for Employee Ownership,
who would be appointed upon the recommendation of the Executive Director of the
New Jersey/New York Center for Employee Ownership; (3) one executive officer of
an employee‑owned business located in this State; (4) one employee of an
employee-owned business in the State; (5) one representative of a labor
organization; (6) one representative of a financial institution or fund that
finances employee ownership transitions; (7) one individual who serves or has
served as a fiduciary or trustee for an employee stock ownership plan or
employee ownership trust; (8) one professional advisor with experience in
employee ownership transitions, including transitions to cooperative or trust
structures; and (9) two public members with expertise in economic development,
employee ownership, community wealth‑building, or small business
assistance.

Under the bill, the commission would be required to
meet at least four times each year. A chair and vice-chair would be selected
by the members of the commission from among its members. Seven members would
constitute a quorum for purposes of transacting business, regardless of any
vacancy on the commission. Under the bill, a public member would be appointed
to the commission for four years, except that of the first members appointed,
three would be appointed for a term of two years, three would be appointed for
a term of three years, and four would be appointed for a term of four years.
Public members would be appointed by the Governor with the advice and consent
of the Senate and would be eligible for reappointment. Employee Ownership Revolving Loan Fund

The bill requires the EDA to establish a non-lapsing
revolving loan fund, to be known as the “Employee Ownership Revolving Loan
Fund,” to provide low-interest loans to support employee ownership transitions.

Under the bill, the EDA may issue low-interest loans
from the revolving loan fund to eligible businesses, participating businesses,
and any other entities determined to be appropriate by the EDA, for the purpose
of facilitating: (1) majority employee ownership transitions; and (2)
reasonable transaction-related and post-transition needs that support the
long-term sustainability of an employee-owned business. An eligible business,
participating business, or other entity authorized by the EDA would be required
to submit an application for a low-interest loan to the EDA and, upon approval
of this application, enter into a loan agreement with the EDA. This loan
agreement would include the following terms: underwriting criteria; maximum
loan amounts; interest rates; repayment terms; permitted uses of proceeds; and
any reporting requirements determined by the EDA.

Under the bill, the revolving loan fund may be
credited with monies received by the EDA from various sources, including State
appropriations, federal funds, charitable contributions, internal transfers,
and investment returns.

The bill also provides that the EDA may use no more
than five percent of the total amount of interest or other charges received
each year in connection with issued loans to offset the administrative costs of
operating the revolving loan fund.
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