A private company’s stock price shot up. Employees who owned shares through the company retirement plan saw a chance to cash out big.
They did.
Then the company landed in Chapter 11 bankruptcy.
That episode is now drawing attention from accounting advisers, who are asking whether privately held companies with employee stock ownership plans—ESOPs—should have to give clearer warning about future cash demands when workers redeem their shares.
“No one was aware of the potential of the cash and capital outflow from that situation,” David Pesce, head of surety at Munich Re Specialty Insurance, said at a June 1 meeting of the Financial Accounting Standards Board’s Private Company Council.
To dig deeper, visit the original article on the Thomson Reuters blog.