Introduction

In recent times, Employee Ownership Trusts (EOTs) have emerged as a powerful tool for ensuring the long-term success of a company. They offer a unique way to engage employees, foster a sense of ownership, and create a sustainable business model, while allowing a possible exit route for the original owners of the business.

What is an Employee Ownership Trust?

An EOT is a specific form of employee benefit trust, where a majority stake in a company is held on behalf of all employees. It is a model that has been gaining traction in recent years, with high-profile companies like John Lewis in the UK operating under this structure.

The benefits of Employee Ownership Trusts

  • Employee engagement: One of the most significant benefits of EOTs is the increased level of employee engagement they foster. When employees have a stake in the company, they are more likely to feel invested in its success, leading to increased productivity and job satisfaction.
  • Succession planning: EOTs also provide a solution to the challenge of succession planning. Instead of selling the business to a third party, owners can sell it to the EOT, ensuring the company’s legacy and values are preserved.
  • Tax advantages: In the UK, there are also considerable tax advantages associated with EOTs. For instance, business owners who sell their company to an EOT can gain relief from Capital Gains Tax.

Implementing an Employee Ownership Trust

Setting up an EOT involves several steps, including:

  1. Valuation: The first step is to get a valuation of the company. This will determine the price at which the shares will be sold to the EOT.
  2. Funding: The EOT will need to raise funds to buy the shares. This is typically done through a combination of company contributions and bank financing.
  3. Trust deed: A trust deed will need to be drawn up, outlining the terms of the EOT and how it will operate.
  4. Sale of shares: The final step is the sale of shares from the owner to the EOT.

The future

In conclusion, EOTs represent a win-win for business owners and employees alike. They offer a way to ensure the long-term success of a company, while also reaping significant benefits along the way.

As more businesses explore this model, the future of work may well be one where employees are not just workers, but owners too.

If you or your company requires advice or assistance with the listing rules, regulations or updates, as well as any advice concerning your company whether listed or not, please do not hesitate to contact the corporate law team at Fisher Jones Greenwood LLP on 01206 835300 or contact us.

Disclaimer: The contents of this blog are for general informational purposes only and does not constitute legal advice. While every effort has been made to ensure the accuracy of the information, laws and regulations may change, and the specific circumstances of each individual may affect how the information applies to them. Readers are encouraged to seek independent legal advice from a qualified solicitor or other professional before making any decisions related to the purchase of a property. Fisher Jones Greenwood LLP does not accept any responsibility or liability for any loss or damage arising from reliance on the information contained in this blog.