SearchEmployee Ownership Trusts
Looking to transition your business to employee ownership? HURST specialises in setting up Employee Ownership Trusts, offering expert guidance every step of the way.
Making your company employee-owned can unlock numerous benefits, including increased productivity, enhanced employee retention and recruitment, and a happier, more motivated workforce. Additionally, transitioning to employee ownership provides existing business owners with an opportunity to sell all or part of their shares at market value, supporting exit or succession planning strategies.
What is Employee Ownership?
Employee ownership is normally achieved by setting up an employee ownership trust (EOT) which owns all or most of the shares in the company, on behalf of the employees.
This model is gaining popularity among businesses of all sizes as it allows companies to:
- Retain independence.
- Reward employees for their hard work.
- Provide outgoing shareholders with full market value for their shares.
Key tax benefits of EOTs
- Business owners pay no capital gains tax when selling their shares to an EOT.
- Employees can receive tax-free bonuses of up to £3,600 per year.
Requirements for an EOT
To qualify for these tax advantages, an EOT must:
- Hold a controlling interest in the company.
- Be established for the benefit of all employees (excluding individuals who own or have owned 5% or more of the shares).
- Treat all employees equitably.
How Does Employee Ownership Work?
The process involves several steps:
- Valuation: A valuation of the business is carried out to determine the fair market value of shares.
- Establishing the Trust: An EOT is created to represent the employees' interests.
- Share Sale: Shareholders enter a contract to sell their shares to the trustees of the EOT.
Funding the EOT
The EOT is funded through the company's trading profits or reserves, with payments structured over time. Initial payments are often made upon completion, while the balance is settled over several years from future profits. In some cases, external borrowing may be used, subject to the availability of distributable reserves.
Day-to-Day Management
The company's day-to-day operations remain under the control of the board of directors. However, many employee-owned businesses establish a staff forum, ensuring employees have a voice. These representatives provide feedback to the EOT trustees, who oversee employee interests.
"During the last eight years, HURST has assisted many owners in selling their companies to an Employee Ownership Trust. Over this time, we have worked with a variety of different businesses in terms of industry sector, size and value. This experience makes us well placed to help you on your own journey to employee ownership."
Why Choose HURST for Your Employee Ownership Journey?
At HURST, we’ve guided numerous businesses across diverse industries—such as manufacturing, professional services, recruitment, and construction—through the transition to employee ownership.
While this model isn’t suitable for every business, we’re here to help you assess whether employee ownership is the right fit. Our expertise ensures you receive tailored advice to achieve your business objectives.
Key Benefits of Working with HURST:
- Extensive experience with EOTs across various industries.
- Comprehensive guidance through valuation, trust setup, and implementation.
- Trusted advisors focused on your company’s unique needs.
- Members of the Employee Ownership Association EOA.
Ready to Explore Employee Ownership?
Get in touch with us at imagine@hurst.co.uk to discover how we can help you make the transition to employee ownership seamless and successful.
