There are several advantages to employees owning all or most of the shares in a company.
For outgoing owners
If you’re selling your company, employee ownership means a guaranteed sale and sale price. Not to mention exemption from Capital Gains Tax when you transfer a business to an Employee Ownership Trust. But as well as greater financial rewards, existing owners can be assured that the business they’ve built will be transferred smoothly for the benefit of the employees, customers and other stakeholders. And that your own unique culture and way of doing things will be preserved and enhanced.
For employee owners
Employee ownership allows dedicated people to enjoy greater rewards for their hard work; giving them a stake in the business and encouraging them to help drive it to greater heights. It also helps to attract and retain the best talent by creating a positive, rewarding culture; all while the business remains totally independent.
Where it works best, employee owners will have a genuine sense of ownership in the business, and their behaviours will follow suit to bring new ideas to the business, exercise their voice, and strengthen growth and productivity. As ever, communication is key and developing the right communication channels will be a key factor in bringing the model to life. Leadership behaviour needs to be authentic and consistent – open with business information/performance/targets, displaying genuine curiosity, being willing to be open to ideas, suggestions and criticism! Being prepared to respond to complete feedback loops.
This is not management by committee, or a form of union or protection of employee rights. The main board is and will responsible for managing the business, and taking the necessary decisions, but getting the right communication channels and behaviours in place between the board, the trustees, and stakeholders generally, will drive performance long-term and bring the benefits of the ownership model to life.
Employee Ownership Trusts
There are a number of models of employee ownership, but the shares of the company will usually be acquired and then held in an Employee Ownership Trust (EOT). This provides a clear structure for employee ownership, provides equitable treatment for all employee owners and can be used to pay income tax-free staff bonuses or dividends.
For vendors, there are major tax benefits to EOTs. As long as certain conditions are met, selling a controlling stake to your employees can provide relief from Capital Gains Tax.
Experience in all sectors
Our team has almost a decade of experience delivering employee ownership transitions and acting as a trustee director in the business going forward. This means we are not only familiar with all of the issues to be addressed at the time of the initial transition, but understand the day to day realities in bringing the model to life and helping secure the engagement, financial and other many benefits it brings.
We partner with companies in all sectors looking to build a secure succession and exploit the opportunities of employee ownership. We also recognise that you need other support in making the transition, and have built a close and trusted network of consultants or advisers who can assist you in areas such as engagement, communications, valuation and financing.
One of our team also assisted as an advisor to one of the panels of the year-long Ownership Effect Inquiry, leading to the 2018 report “The Ownership Dividend – the economic case for employee ownership.” This was one of the most comprehensive studies of employee ownership in the UK, highlighting the many benefits of a model that cultivates long-term thinking, enhances productivity, promotes engagement and wellbeing, and more.
No two businesses are the same
While we’re fluent in the legal process involved in establishing employee ownership, we always approach it from our client’s point of view. Whether you’re a start-up or an established firm, we will personally guide you through every aspect of set-up, recognising that the model you adopt and how it works will be unique to you.
What’s more, we’ll give you a straight, honest appraisal of whether employee ownership is the right move for you at all.
The perfect time to talk to us
From employees looking for greater engagement and rewards, to owners wanting a smooth succession and long-term security for their business, employee ownership can be a win/win situation for all parties. Get in touch for a chat with our experts about a smooth, efficient and successful transition for your business.