Employee Ownership Trusts (EOTs)

Transition to Employee Ownership with Confidence

Employee Ownership Trusts (EOTs) offer a powerful way to transition your business to employee ownership, providing long-term stability and rewarding the people who contribute to its success. At Lawson West Solicitors, we specialise in guiding businesses through the process of establishing an EOT, ensuring a smooth transition that benefits both the company and its employees.

What is an Employee Ownership Trust (EOT)?

An Employee Ownership Trust is a special type of trust that holds a controlling interest in a company on behalf of its employees introduced by the UK Government to promote employee ownership. This structure allows business owners to sell their company to the trust, which then operates the business for the benefit of all employees. EOTs are increasingly popular as they provide significant tax advantages, promote employee engagement, and help preserve the company’s legacy.

Key benefits of an EOT include:

• Tax-Free Sale: Business owners can sell their shares to an EOT without paying Capital Gains Tax (CGT), making it a highly tax-efficient exit strategy, provided certain statutory conditions are met.

• Employee Engagement and Retention: By giving employees a stake in the business, EOTs foster a sense of ownership, leading to higher motivation, retention, and productivity.

• Long-Term Stability: EOTs help to preserve the company’s culture, values, independence and continuity, ensuring that it remains in the hands of those who understand and care about its future.

How Does an EOT Work?

Transitioning to an EOT involves several key steps:

1. Establishing the Trust

   The first step is to set up the Employee Ownership Trust. Our solicitors will help you draft the trust deed and ensure that it complies with all legal requirements.

2. Valuation of the Company

   An independent valuation is conducted to determine the market value of the company. This is crucial for setting the sale price to the EOT.

3. Financing the Purchase

   The EOT typically finances the purchase of the company through a combination of existing company funds, bank financing, or a deferred consideration where the company’s future profits are used to pay off the purchase price over time.

4. Transfer of Shares

   Once the trust is established and financing is secured, the shares are transferred from the current owners to the EOT. The EOT then holds the shares on behalf of the employees.

5. Ongoing Management

   The EOT becomes the controlling shareholder, with a board of trustees overseeing the management of the trust. The business continues to operate as usual, with profits benefiting all employees.

Why Choose Lawson West Solicitors for Your EOT?

• Specialist Expertise: Our solicitors have extensive experience in setting up EOTs, guiding businesses through every step of the process to ensure a successful transition.

• Tailored Legal Solutions: We provide personalised legal advice, helping you structure the EOT in a way that best meets your business goals and needs.

• Comprehensive Support: From initial planning and legal structuring to ongoing management and compliance, we offer end-to-end support throughout the EOT process.

• Collaborative Approach: We work closely with your financial and tax advisors to create a tax-efficient and financially sound EOT structure.

Contact Us

If you’re considering transitioning your business to employee ownership through an Employee Ownership Trust, expert legal advice is essential. Contact Lawson West Solicitors today to discuss how we can support you in establishing an EOT.