▸SECTION 1
Chapter 23D of the General Laws as appearing in the 2022 Official Edition is hereby amended by adding the following after Section 6:-
▸SECTION 6A
(a) As used in this section, the following words shall have the following meanings unless the context clearly requires otherwise:-
“Qualified Business”, an entity that: (i) Has operated a principal place of business in Massachusetts for at least one year (ii) Is a taxpayer subject to Massachusetts tax under relevant tax articles (MGL c. 62B), but not limited to a C corporation, S corporation, limited liability company, partnership, limited liability partnership, or a sole proprietorship (iii) Is a privately held business (iv) Has at least three workers not including the owner, or other similar pass-through entity (v) Meets the relevant size standards for a small business by industry, as set forth by the U.S. Small Business Administration in 13 CFR 121.201 (vi) Is not a medium or large business as defined by the US Small Business Administration (vii) Is not a publicly traded company
“Owner”, The owner(s) of a Qualified Business prior to a Qualified Business Sale
“Qualified Employee Group” (QEG), A group containing at least a simple majority of full-time and/or part-time workers at the Qualified Business, totaling a minimum of three, at the point of formal notice of business sale by the Owner to workers
“Employee Owned Business”, (i) An employee cooperative corporation organized under Chapter 157A of the Massachusetts General Laws, or (ii) A Limited Liability Company (LLC) or Limited Liability Partnership (LLP), in either case, whose bylaws, operating agreement or partnership agreement, as applicable, meets the following requirements: (A) All persons who meet the definition of employee owner (“worker owner”) according to the bylaws, operating agreement or partnership agreement of the business are voting members of the company, and have equal voting rights in all decisions brought before the membership, and (B) any profits distributed to said worker-owners by the company are distributed on the basis of their patronage in the company, with patronage measured based on the labor supplied to the company.
“Qualified Business Sale”, Any transaction between the Owner of a Qualified Business and a QEG that concludes in the Qualified Business becoming an Employee Owned Business or at least a 51% increment of total ownership of the Qualified Business being transferred to an Employee Owned Business. Such transaction shall not include transfers by inheritance, nor transfers or sales to immediate family, defined as siblings, spouses and/or children.
(b) (i) In the event the Owner of a Qualified Business decides to sell such Qualified Business or at least a 51% increment of total ownership of such Qualified Business in an equity sale, they must notify all current full-time and part-time workers at the business within seven days of the decision in a dated written notice as specified below. Such notice must be posted on the date listed in the notice in a prominent location to which all workers have access, or if no such place exists, via an existing electronic medium used to communicate with workers. Such notice must communicate: (A) Date of the notice (B) The Owner’s intent to sell the business (C) Contact information for the Massachusetts Center for Employee Ownership (MassCEO), including the MassCEO website, specifying MassCEO as a resource to assist workers considering buying the business (D) Any price the Owner of the Qualified Business proposes for the business sale.
(ii) In the event a QEG does not purchase 100% of total ownership of the Qualified Business, such as where Owners or other parties retain or purchase a stake in the business, the provisions of this section shall apply only if the QEG holds the sole voting rights and decision-making power in the resulting business. Sales of the Qualified Business that include agreements infringing on this requirement for democratic governance by worker-owners shall nullify the benefits to the Owner from this section.
(iii) Any group of workers that is eligible to form a QEG has 30 days from the date the Owner’s notice was posted or upon the workers’ electronic receipt thereof, to signal in writing via registered mail to the Owner their intent to compete to buy the Qualified Business, and list all members of the QEG. The Owner shall immediately make available any financial records necessary for evaluating the health and value of the business, following the signing of a non-disclosure agreement between the Owner and the QEG. If after 30 days no QEG has signaled interest in a purchase, the Owner shall be free to sell the business as they choose.
(iv) From the date any QEG signals intent to buy the business, the Owner and the applicable QEG shall have 180 days to have the value of the business assessed by a qualified independent business valuation consultant agreed by the Owner and the QEG, and to reach agreement on a price; or alternatively if a competitive good-faith offer is made by a third party, the QEG shall have the opportunity to match that offer.
(v) In the event the Owner and QEG reach a price that is substantially equivalent or superior to all other good-faith offers received on the open market within the 180-day period, the Owner shall be obligated to sell the business to the QEG. However, the highest bid need not be the winning bid, and the Owner may sell to a QEG for reasons other than preferring the highest bid.
(vi) In the event of a completed Qualified Business Sale, the Owner shall be exempted from obligation under Chapter 62 Section 4 of the General Laws, to pay the state capital gains tax on any gains from the sale of the Qualified Business under $1,000,000.00. Any gains from the sale of the Qualified Business over $1,000,000.00 shall continue to be subject to the relevant capital gains tax. In the event of a partial sale of the Qualified Business to the QEG, this exemption shall apply only to the proportion of the business being sold to the QEG.
(vii) All labor union membership or collective bargaining agreements existing prior to a Qualified Business Sale shall continue to be in effect under the new ownership structure.
(viii) Upon the completion of a Qualified Business Sale, the resulting business shall not be subject to external governance, decision-making or management influence from non-worker or non-member parties, including non-member shareholders or outside investors. Any contract enabling control of the company by outside investors shall not be in compliance with this section.
(ix) In the event that the Owner of a Qualified Business fails to comply with the terms of this Section, the QEG shall have the right to demand a court injunction to stop such improper sale and require compliance with this Section.
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SECTION 1. Chapter 23D of the General Laws as appearing in the 2022 Official Edition is hereby amended by adding the following after Section 6:-
Section 6A
(a) As used in this section, the following words shall have the following meanings unless the context clearly requires otherwise:-
“Qualified Business”, an entity that: (i) Has operated a principal place of business in Massachusetts for at least one year (ii) Is a taxpayer subject to Massachusetts tax under relevant tax articles (MGL c. 62B), but not limited to a C corporation, S corporation, limited liability company, partnership, limited liability partnership, or a sole proprietorship (iii) Is a privately held business (iv) Has at least three workers not including the owner, or other similar pass-through entity (v) Meets the relevant size standards for a small business by industry, as set forth by the U.S. Small Business Administration in 13 CFR 121.201 (vi) Is not a medium or large business as defined by the US Small Business Administration (vii) Is not a publicly traded company
“Owner”, The owner(s) of a Qualified Business prior to a Qualified Business Sale
“Qualified Employee Group” (QEG), A group containing at least a simple majority of full-time and/or part-time workers at the Qualified Business, totaling a minimum of three, at the point of formal notice of business sale by the Owner to workers
“Employee Owned Business”, (i) An employee cooperative corporation organized under Chapter 157A of the Massachusetts General Laws, or (ii) A Limited Liability Company (LLC) or Limited Liability Partnership (LLP), in either case, whose bylaws, operating agreement or partnership agreement, as applicable, meets the following requirements: (A) All persons who meet the definition of employee owner (“worker owner”) according to the bylaws, operating agreement or partnership agreement of the business are voting members of the company, and have equal voting rights in all decisions brought before the membership, and (B) any profits distributed to said worker-owners by the company are distributed on the basis of their patronage in the company, with patronage measured based on the labor supplied to the company.
“Qualified Business Sale”, Any transaction between the Owner of a Qualified Business and a QEG that concludes in the Qualified Business becoming an Employee Owned Business or at least a 51% increment of total ownership of the Qualified Business being transferred to an Employee Owned Business. Such transaction shall not include transfers by inheritance, nor transfers or sales to immediate family, defined as siblings, spouses and/or children.
(b) (i) In the event the Owner of a Qualified Business decides to sell such Qualified Business or at least a 51% increment of total ownership of such Qualified Business in an equity sale, they must notify all current full-time and part-time workers at the business within seven days of the decision in a dated written notice as specified below. Such notice must be posted on the date listed in the notice in a prominent location to which all workers have access, or if no such place exists, via an existing electronic medium used to communicate with workers. Such notice must communicate: (A) Date of the notice (B) The Owner’s intent to sell the business (C) Contact information for the Massachusetts Center for Employee Ownership (MassCEO), including the MassCEO website, specifying MassCEO as a resource to assist workers considering buying the business (D) Any price the Owner of the Qualified Business proposes for the business sale.
(ii) In the event a QEG does not purchase 100% of total ownership of the Qualified Business, such as where Owners or other parties retain or purchase a stake in the business, the provisions of this section shall apply only if the QEG holds the sole voting rights and decision-making power in the resulting business. Sales of the Qualified Business that include agreements infringing on this requirement for democratic governance by worker-owners shall nullify the benefits to the Owner from this section.
(iii) Any group of workers that is eligible to form a QEG has 30 days from the date the Owner’s notice was posted or upon the workers’ electronic receipt thereof, to signal in writing via registered mail to the Owner their intent to compete to buy the Qualified Business, and list all members of the QEG. The Owner shall immediately make available any financial records necessary for evaluating the health and value of the business, following the signing of a non-disclosure agreement between the Owner and the QEG. If after 30 days no QEG has signaled interest in a purchase, the Owner shall be free to sell the business as they choose.
(iv) From the date any QEG signals intent to buy the business, the Owner and the applicable QEG shall have 180 days to have the value of the business assessed by a qualified independent business valuation consultant agreed by the Owner and the QEG, and to reach agreement on a price; or alternatively if a competitive good-faith offer is made by a third party, the QEG shall have the opportunity to match that offer.
(v) In the event the Owner and QEG reach a price that is substantially equivalent or superior to all other good-faith offers received on the open market within the 180-day period, the Owner shall be obligated to sell the business to the QEG. However, the highest bid need not be the winning bid, and the Owner may sell to a QEG for reasons other than preferring the highest bid.
(vi) In the event of a completed Qualified Business Sale, the Owner shall be exempted from obligation under Chapter 62 Section 4 of the General Laws, to pay the state capital gains tax on any gains from the sale of the Qualified Business under $1,000,000.00. Any gains from the sale of the Qualified Business over $1,000,000.00 shall continue to be subject to the relevant capital gains tax. In the event of a partial sale of the Qualified Business to the QEG, this exemption shall apply only to the proportion of the business being sold to the QEG.
(vii) All labor union membership or collective bargaining agreements existing prior to a Qualified Business Sale shall continue to be in effect under the new ownership structure.
(viii) Upon the completion of a Qualified Business Sale, the resulting business shall not be subject to external governance, decision-making or management influence from non-worker or non-member parties, including non-member shareholders or outside investors. Any contract enabling control of the company by outside investors shall not be in compliance with this section.
(ix) In the event that the Owner of a Qualified Business fails to comply with the terms of this Section, the QEG shall have the right to demand a court injunction to stop such improper sale and require compliance with this Section.