Ownership transferred to employees through EOT rather than third party sale
An Employee Ownership Trust (EOT) is a trust designed to encourage employee ownership of the company they work for. there are significant advantages for the right business, but care should be taken to ensure that the advice given is accurate and relevant.
We advised an owner to reconsider selling his company. They wanted to retire and sell up. However, what the prospective buyers were offering was not high enough.
There would have also been capital gains tax payable on an external sale. All of this ramped up the uncertainty and pressure.
Rather than a trade sale we suggested that the company may want to transfer the shares to an Employee Ownership Trust (EOT). In doing so the staff collectively became the company’s shareholders. As a consequence, we were able to agree a higher valuation for the company with HMRC, by nearly £2m.
We successfully guided them through the process. The owner gained an extra £2.5m after tax, and a much quicker exit process too. The company’s management team stayed on as they now had a good incentive to grow the company further.