Employee Ownership Trusts

Why would you consider an EOT?

In the current economic climate, many shareholders may be looking to exit without causing upset to their workforce. Selling through an EOT brings benefits to both business owners and their employees while providing a smooth platform for transition.

These trusts – famous examples of which include John Lewis Partnership and Richer Sounds – also lessen the burden for owners who wish to concentrate on the day-to-day running of the company rather than a time-consuming sale process.

EOTs also provide a number of tax benefits

For the owner – disposals made into the trust can be made free from capital gains tax and inheritance tax

For employees – the trust can pay annual bonuses of up to £3,600 income tax-free

For the company – Corporation tax can be deducted for the value of the bonuses.

How an EOT could benefit your business

EOTs are often set up by the company’s existing owners, perhaps as part of an exit or succession planning strategy, selling their shares to an employee ownership trust. These shares are then held for the benefit of employees.

The benefits of using EOTs are numerous and far-reaching.

In the short term EOTs allow for exits where there is no obvious third party, they provide quick exit routes for shareholders and owners can keep some involvement in the company (up to 49%).

Businesses we’ve worked with

Our Corporate team have worked with a range of businesses transitioning to EOTs. They draft key documents, including trust deeds, which establish governing powers of the EOT, articles of association, which set out rules by which each company is governed and share purchase agreements, to deal with the way in which shares are transferred and for what price.

Our EOT specialists within the Corporate team have worked across sectors as diverse as care, communications and law – with a collective value of £100m – to help a range of companies achieve their goals and become employee-owned.