Legal Services
Kingsley Napley LLP
Full Credential Description
Creating an Employee Ownership Trust | Case Studies | We Case Studies Creating an Employee Ownership Trust When our client, Mark, wanted to sell his company while protecting the future of the business and his employees, an Employee Ownership Trust was the perfect solution. He approached our Corporate Commercial & Finance team to guide him every step of the way When our client, Mark, wanted to sell his company while protecting the future of the business and his employees, an Employee Ownership Trust was the perfect solution. He approached our Corporate Commercial & Finance team to guide him every step of the way. Our Challenge An Employee Ownership Trust (EOT) is an increasingly popular structure for SMEs owned by entrepreneurs looking to sell their business without it losing its identity to private equity or a larger trade buyer. Introduced by the government in 2014, an EOT is created specifically to hold shares in a company on trust for its employees, so that they become the (indirect) majority owners of We. The benefit for We’s employees of an EOT is that, once Mark has been paid his cash, the future profits of the business will ultimately belong to them, giving them a strong incentive to make it a success.The most famous employee-owned company is John Lewis, and it is a shining example of how employee ownership can drive the success of a business. A sale to an EOT means no third-party buyer needs to be found, and an EOT also has material tax advantages: the owner pays no tax on the sale to the EOT, and the employees are able to receive (income) tax free bonuses in the future (capped at £3,600 per year. While there is no income tax, national insurance is still payable). However, creating an EOT is not straightforward. Such generous tax reliefs come with a significant amount of legislative conditions, and the sale requires considerable specialist expertise to make sure it satisfies all the requirements while still being commercially viable.
Measurable Results
Successfully created Employee Ownership Trust structure enabling business sale while protecting employees and company future. Tax-efficient succession planning achieved with full regulatory compliance.