Name: MLP Law
Address: 7 Market Street, Altrincham, Cheshire,, WA14 1QE
Telephone: 01619269969

Employee Ownership Trust

Business Legal Services / Corporate Lawyers / Employee Ownership Trust

Discover how Employee Ownership Trusts (EOTs) can transform your business by enhancing employee engagement, helping secure your legacy and ensuring a successful transition plan. Learn about the benefits and process of setting up an EOT with mlplaw.

What is an Employee Ownership Trust?

An Employee Ownership Trust is a business ownership model where a trust holds a significant or majority stake in a company on behalf of its employees. The trust operates for the benefit of all employees, providing them with an indirect ownership stake and a say in the company’s future. In summary, a company seeking to transition a controlling (more than 50 percent) ownership to their employees can consider three methods:

Indirect Employee Ownership

Employees do not own shares directly but are beneficiaries of a trust that holds the controlling interest in the company’s shares. This method suits businesses with high staff turnover and many employees, offering tax-efficient profit-sharing.

Direct employee ownership

Employees directly own shares, usually through a statutory tax-advantaged share plan in a parent company. This model provides direct ownership and benefits from tax incentives.

Hybrid Model

Combines trust ownership with direct share ownership. Retiring vendors initially sell their shares to the EOT, and over time, some shares are transferred to employees. This model is ideal for businesses where new managers want ownership stakes while original founders maintain some control.

Advantages of setting up
Employee Ownership Trust

Allows an exit where there is no obvious third party purchaser
Allows smooth transition of business ownership
Can provide a quick and streamlined exit route for shareholders
Allows a tax free disposal by UK individual shareholders
Owner can retain some involvement (up to 49%)
Share capital still available to incentivise management and key employees
Aligns the goals of stakeholders and employees
Improved employee retention and morale, productivity and performance
Encourages innovation at all levels
Improved business performance driven by stakeholder values

Tax benefits

Owner: The initial sale of shares to the EOT is exempt from capital gains tax (CGT) and inheritance tax.
Employee: The EOT can pay annual bonuses of up to £3,600 to employees free of income tax.
Company: A corporation tax deduction for the value of the bonuses will be available to the company and EOT has the same inheritance tax reliefs (IHT) as other employee trusts.

Is an EOT right for your business?

Requirements:

the trading requirement – must be a trading company or holding company of one
the all-employee benefit requirement – must apply to all employees equally (with some variation based on their remuneration, length of service and/or contracted hours)
the controlling interest requirement – trustees must hold more than 50% of shares and voting rights of the company

Suitable companies:
EOTs are ideal for privately held businesses with stable profitability, a focus on long-term employee retention, and those looking for succession planning solutions.

Less suitable companies:
Start-ups, highly leveraged businesses, and publicly traded companies may find EOTs less beneficial due to financial instability or regulatory complexities.

Empower Your Employees, Secure Your Legacy

Request a consultation with one of our experienced lawyers to discuss the opportunities of your business transition to

Employment Ownership Trust

Request a consultation

Why choose mlplaw for you Employment Ownership Trust needs?

At mlplaw we pride ourselves on our exceptional expertise and the proficiency of our top-tier lawyers. With extensive experience in various aspects of corporate and commercial law, our team is well-equipped to guide you through the complexities of establishing and managing Employment Ownership Trusts. We invite you to explore our case studies and testimonials below to see the successful outcomes we have achieved for our clients.

Case Study: mlplaw facilitates EOT transition for leading UK sports retailer

30th Jan 2025

mlplaw has advised one of the UK’s leading sports retailers on a...

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1 min read

Case Study: December Group Transforms into an Employee-Owned Business

28th Nov 2024

mlplaw has advised December Group Limited, the holding company for a property...

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1 min read

Case Study: Helping Edge Public Solutions Transition to Employee Ownership Trust

19th Aug 2024

This project involved the incorporation of a new employee owned trust company...

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2 mins read

Techer and a boy with learning difficulties

Case Study: NTAS Restructures by Empowering Employees Through EOT

24th Jul 2024

We acted for the new employee owned trust company in the restructure...

Read

1 min read

Case Study: mlplaw closes ‘John Lewis’ style NHS deal

12th Jul 2022

Altrincham-headquartered MLP Law has advised an NHS GP practice on a transition...

Read

2 mins read

Our Approach

At mlplaw, we bring unparalleled expertise to every Employee Ownership Trust (EOT) case, ensuring that your business’s transition is seamless and tailored to your unique needs.

Our team of specialists, led by Partners with decades of experience in Commercial and Corporate Law, meticulously guides you through each step of the process.

We’ve successfully handled complex EOT transitions, including ground-breaking cases such as the UK’s first-ever General Practice (GP) to adopt the EOT model.

With a doggedly commercial approach, we focus on securing your business’s long-term success, aligning the interests of both owners and employees.

Testimonials

“When we decided that we would convert our business to an EOT model, we were unsure of what to expect or what would be involved in the process. Having worked with mlplaw over a number of years, we reached out to Stephen and his team. They were exceptional at making things very easy and very clear for us to understand and talking us through the whole process. We were involved at every step and mlplaw helped us in navigating what is a truly unique transaction. The implementation of the EOT structure means that Edge Public Solutions can now continue to grow well into the future, strengthen the long-term ethos of the company and provide our dedicated employees with a voice and control over the future direction of the company.”

Jim Aspin, Edge Public Solutions

“After exploring several succession planning options, we found that the EOT model was the best way forward, offering attractive benefits for both the shareholders and employees. We are very grateful for the expertise and guidance provided by mlplaw, whose knowledge and experience provided us with clear advice and guidance throughout our EOT journey. We would highly recommend them”

UK leading sport retailer’s Managing Director

“Stephen and everyone at mlp have looked after myself, my family and my business now for well over a decade and we could not imagine dealing with anyone else for our legal advice. He has helped us grow our company from a small £2m turnover business to over £33m including countless property deals, Employment contracts, HR issues, all our commercial dealings and the acquisition of 17 stores and for all this we will be forever grateful. Plus, with us both being City fans, we have had a great 10 years of football to talk about before and after our business meetings. Tracy and I would just like to say thank you for all the help, advice and most importantly friendship.”

Simon Vardy, Sim Trava

“We always receive timely advice and it is given in plain and understandable terms.”

Claire Gardner, MD Osborne Delta (Lightning Conductors) Ltd

“Very efficient and responsive in engaging clients, keeping them up to date on the progress of matters, and responding to queries.”

Legal 500

“A really great multidisciplinary team able to handle my firm needs, I have dealt with many solicitors in over fifty acquisitions and MLP stand out as pragmatic and proportional with sound, hand-on advice.”

Legal 500

“Stephen is great at simplifying situations and explaining legal processes in basic terms so that you are able to understand and make the right decisions for your business. He is responsive and supportive as well as extremely knowledgeable. We have used Stephen on two occasions and were delighted with his expertise and service given. I wouldn’t hesitate in recommending him to anyone needing commercial, legal support for their business.”

LD, Review Solicitors

“Stephen and his team of experts at MLP have been advising us since 2014 on areas ranging from commercial transactions and the legal due diligence around them to employment law, commercial disputes, and property. Always prompt to respond, I’ve found the help and advice I’ve received over the years is accurate, with the balance of risks clearly explained, but always accompanied with recommendations that are in a commercial context. Added to this, the personal and cheerful touch that is always present in their service makes them a delight to work with. I’d highly recommend them!”

MG, Review Solicitors

What is the difference between EOT and EBT (Employee Benefit trust?

An EOT focuses on transferring company ownership to employees through a trust, providing them with long-term ownership and profit-sharing benefits. An EBT, on the other hand, primarily provides various employee benefits, such as bonuses or share options, without necessarily transferring ownership.
What other successful exit strategies can you recommend?

Other successful exit strategies include selling to a third party, conducting a management buyout (MBO), or merging with another company. Each option offers unique benefits depending on the business goals and the desired level of control post-exit.
How is an EOT structured?

An EOT is structured with a trust that holds the shares on behalf of employees. The trust is managed by trustees who ensure that the trust operates in the best interest of the employees and the company.
How long does it take to establish an EOT?

The process of establishing an EOT typically takes several months, depending on the complexity of the business and the specific arrangements required. This includes planning, legal documentation, and stakeholder consultations.
What are the costs associated with setting up an EOT?

The costs of setting up an EOT can vary widely depending on the size and complexity of the company. These costs may include legal fees, valuation fees, and advisory fees. It’s important to get a detailed estimate from your legal advisor.
What happens to the business profits in an EOT?

In an EOT, the business profits can be distributed among employees, reinvested in the company, or used to repay any debt incurred to finance the EOT. The specific distribution plan will depend on the company’s policies and the terms of the trust.

Employee Ownership Trust