An employee's ability to sell shares in an active ESOP depends on the specific plan's rules and structure, as well as the conditions set forth in the company's ESOP agreement.
In general, ESOPs are designed to be retirement plans, and they usually do not allow employees to sell shares while they are still employed by the company. Instead, employees accumulate shares in their ESOP accounts over time through company contributions, which are often subject to a vesting schedule. The shares represent a future benefit to the employees when they leave the company or retire.
When an employee leaves the company, retires, or in some cases, becomes disabled or dies, the ESOP is typically required to buy back the shares from the departing employee at their current fair market value. This process is known as a "repurchase obligation" and the timing and method of this transaction are defined by the ESOP's summary plan description.
There are certain circumstances where employees might be able to diversify a portion of their ESOP shares into other investment options within the plan after a certain age and years of participation in the plan, which is often referred to as a “diversification option.”
It is also important to note that the liquidity of ESOP shares is generally limited, since the shares are not traded on a public exchange. The company itself, through the ESOP, is the market for buying and selling the shares.
For precise details on when and how an employee can sell their ESOP shares, it is necessary to refer to the specific ESOP plan documents and consult with the plan administrator or a financial advisor familiar with ESOPs.