An increase in Employee Ownership Trusts

Employee Ownership Trusts have become an increasingly popular model for our clients and this Financial Times article (also pictured below) provides an interesting insight into EOTs and their recent surge in popularity.?Nearly 500 EOTs were set up in the year to September 2022 which is a sharp increase from the 235 established in the previous 12 months and 56 the year before that.

The Financial Times article gives some examples of companies that have recently set up EOTs.?Danny Sims, founder of DJ Research, a market research agency with more than 100 employees, sold 65% of the business he set up 2 decades ago to an EOT last year.?He commented that his reason for selling to an EOT was that he didn’t want the company to be swallowed up as part of a bigger group and he wanted to keep the legacy of an independent company.?Whilst nearly 40% of all EOTs are professional services firms, other sectors are following.?Some high profile companies that have established EOTs in recent years include the treetop adventure business Go Ape in 2021, the hi-fi retailer Richer Sounds in 2019 and the organic vegetables firm Riverford in 2018.

EOTs can offer both practical and tax advantages for companies, their founders and employees.?They can provide an attractive exit plan for founders particular during uncertain financial times where there may be no immediate third party buyer on the horizon.

One disadvantage noted by Malcolm Hurlston of The Employee Ownership Centre is that EOTs can be a bit restricting as there are likely to be many other people who contribute to the success of a business but who are not employees and therefore will not benefit from the trust.

Please contact James Paton-Philip or Sean Lightfoot (partners in our Corporate team) if you would like to discuss whether an EOT might be appropriate for your business.