Could an Employee Ownership Trust be the answer to your Exit?

Employee Ownership Trusts (EOTs) are a business structure in which a company is owned by a trust on behalf of its employees. This model has gained popularity as a way to engage employees more deeply and align their interests with the long-term success of the company. Here are some key points about EOTs:

Key Features of Employee Ownership Trusts:

Ownership Structure:

• The company is owned by a trust, which holds shares on behalf of the employees.
• Employees do not own shares directly but benefit from the trust's ownership.

Employee Benefits:

Employees typically receive bonuses linked to company performance.

The structure fosters a sense of ownership and can improve employee morale and productivity.

Tax Advantages:

• In the UK, there are significant tax incentives for companies that transition to an EOT.
• For example, there is no capital gains tax on the sale of a controlling interest to an EOT.

Governance:

• The trust is managed by trustees who ensure the company's operations benefit the employees.
• Governance structures vary but generally include employee representation.

Succession Planning:

• EOTs provide a viable succession strategy for business owners looking to retire or exit.
• It ensures the company's continuity and preserves its legacy.

Advantages of EOTs:

• Employee Engagement: With a stake in the company's success, employees are often more motivated and engaged.
• Long-term Stability: EOTs promote stability by focusing on sustainable growth and long-term planning.
• Cultural Alignment: This model helps maintain the company's culture and values by involving employees in decision-making.

Examples of EOTs:

• John Lewis Partnership: One of the most well-known examples, where the employees are partners and receive a share of the profits.
• Aardman Animations: The creators of Wallace and Gromit transitioned to an EOT to ensure the company remained independent and aligned with its creative values.

Challenges of EOTs:

• Complex Setup: Establishing an EOT involves legal and financial complexities that require careful planning and professional advice.
• Cultural Shift: Transitioning to an EOT may require a significant cultural shift within the company, necessitating strong leadership and clear communication. It is critical to prepare the team well in advance of the transition. My recommendation is 2 years minimum.

Steps to Establish an EOT:

1. Valuation: Determine the value of the business to set up the trust. I can assist you in getting this done to get the ball rolling and investigate with an EOT is the right choice for you.
2. Legal Framework: Create the legal structure for the EOT, including trust deeds and governance documents. It is so important to really understand the legalities. It can feel foreign. I can put you in touch with highly recommended advisors.
3. Financing: Arrange the financing for the trust to purchase shares from the existing owners. Challenger banks have an appetite to support EOT's if your own bank is not so keen. I can put you in touch with people who will facilitate you and the business getting the best deal.
4. Communication: Clearly communicate the benefits and changes to all employees to ensure a smooth transition. I have started to use the Cloud-Busting Strategic Roadmap now to pave the way and transition from your current structure to an EOT. 2-3 years. And it covers the important communication criteria.

Further Reading and Resources:

• Employee Ownership Association: Provides resources and guidance on employee ownership models.
• Gov.uk - Employee Ownership Trusts: Official government resources and tax information related to EOTs.

Employee Ownership Trusts can be a powerful tool for fostering a committed workforce and ensuring the longevity of a business. However, it's essential to approach the transition with careful planning and professional guidance to navigate the complexities involved.

I love what Gripple UK & Ireland have achieved with their EOT. Here is a bit of background....

Gripple Ltd, based in Sheffield, is a leading example of a successful employee-owned company in the UK. The company manufactures innovative wire joiners and suspension systems and has been fully employee-owned since 2011. Here are some key aspects of Gripple’s Employee Ownership Trust (EOT):

Key Aspects of Gripple’s Employee Ownership

1. GLIDE (Growth Led Innovation Driven Employee):
2. Employee Engagement:
3. Governance and Culture:
4. Recognition and Awards:

Benefits of Employee Ownership at Gripple

• Increased Productivity: Employees who have a stake in the company tend to be more productive and committed.
• Retention: The ownership model has improved employee retention, reducing turnover costs and maintaining continuity.
• Innovation: A culture that encourages input from all employees leads to more innovative solutions and continuous improvement.

Gripple’s journey showcases how transitioning to an EOT can provide substantial benefits, including enhanced employee engagement, better governance, and sustained innovation. If you’re considering this model for your business, Gripple serves as an inspiring example of how employee ownership can drive success.

If this has sparked your interest and you want to talk this through in detail. Then get in touch and let's organise a chat.

What does the new Labour Government mean to SME's?

Rather than rinse and repeat, I would check out this article for a summary of what we could be looking to expect:

No tax rises, for now

Support against late payments

Growth for businesses all over the country

Revitalising high streets and business rates

Stability in energy

A closer relationship with the EU?

https://www.money.co.uk/business/what-does-a-labour-government-mean-for-your-business

Who knows what they will push through over their term in office. But let's hope they recognise the value the 210k + small sized businesses + 35.5k medium-sized businesses bring to the UK economy. We need nurture, support and opportunities.

Plate Spinning Tips for July

Summer holidays is upon us. But the business remains open throughout.

Additional time challenges often crop up - childcare, holidays etc.

So be super strict and disciplined with your time throughout August. Try this:

Set Boundaries ????♂?

• Avoid Multitasking: Focus on one task at a time to improve efficiency and quality of work
• Set Work Hours: Establish clear work hours and stick to them to prevent overworking and ensure a healthy work-life balance.

Let's see if you can get everything done AND fit in the additional areas that need your time, attention and focus!!

Good luck.

Thanks for reading. Get in touch if you would like more information on anything I have covered. ??