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Reflections on employee ownership
Key points
- An employee ownership trust (EOT) can be a slower transition than a trade sale or management buyout allowing the former shareholder to continue to be involved.
- Important to ensure that disqualifying events are not sparked when planning an EOT.
- Onshore trustees are usually the most cost effective and simplistic route.
- Worth obtaining clearances where possible from HMRC.
- Former owners may need to rethink how they run the company after the EOT – bearing in mind they are running it for the employee group.
- Consider setting up an enterprise management incentive at the same time as the EOT to incentivise key management.
The use of employee ownership trusts (EOTs) is on the increase. This is perhaps not surprising – it is a great example of how the tax system can be used to drive a particular behaviour and encourage a different way of thinking. Here we reflect on some...
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