Building a better business – employee ownership
An increasing number of new and existing business owners are choosing an employee ownership structure, an exciting alternative to the traditional business structures in the market, for their organisation as part of growth or succession plans.
We have extensive expertise advising on employee ownership solutions for a wide range of organisations.
“We think that employee ownership is ideally suited to Fitzgerald’s philosophy, and the thinking behind employee ownership has businesses exactly like ours in mind. When we were ready to go down this road, David and the team from Anthony Collins Solicitors made the process absolutely clear, explained the legal documents we needed, and worked really hard to make it happen in our timescale. We’re delighted to have made the change, and we’re very excited about the future for Fitzgerald.” Nick Coley, MD at Fitzgerald Contractors
What is employee ownership?
An organisation is generally employee-owned where the whole, a majority or a significant part of it is owned by or on behalf of all its employees.
There are three main forms of employee ownership:
- direct (shares held by employees individually), including worker co-operatives;
- indirect (shares are held in a trust); or
- a hybrid of the two.
We can help you decide which route to employee ownership would work best for you after a discussion about your organisation and goals.
What is an employee ownership trust (EOT)?
An EOT is a trust that enables an organisation to become owned by its employees and can be set up by the existing owner/s. The shares in the business are transferred to the trustee, who holds them on behalf of the employees.
Employee ownership could be an option in the following circumstances:
- as a succession plan for founders
- as a public-service spin-out
- for a start-up organisation
- as part of growth and expansion plans
- a route to recovery following insolvency or closure threat
What are the benefits of employee ownership?
Benefits for the organisation can include high employee engagement, with a strong sense of collaboration and shared purpose. An employee-owned structure is a powerful incentive and can increase productivity, promoting organisational growth, leading to a stronger performing business.
For both owners and employees, an EOT provides tax incentives. Those selling their shares may do so free of capital gains tax and once a company is owned by an EOT, it can pay annual bonuses to its employees free of income tax.
For the business owner, leadership succession can be implemented over time and employee ownership can be implemented at a pace that suits them.
You can read more in our blog posts, Securing the future of your business, Succession plan and Building and purpose.
Setting up an employee ownership trust
We can guide you through the entire process, including:
- talking to you about the principles and helping you decide whether this is the right step for you
- deciding the terms of the sale together with your accountants or financial advisers
- advising on pre-transaction reorganisations or restructuring
- setting up the trust and the trustee (often an incorporated body)
- making changes to the main company constitution
- drafting the documents to transfer the shares to the employee ownership trustee
- thinking about practical ways of engaging your staff, like setting up employee leadership councils
- dealing with funders and financing the deal
- sorting out the deal and managing all the paperwork with Companies House and HMRC
How do I find out more about employee ownership?
For more information, please contact David Alcock.
