Employee ownership trusts

Employee ownership trusts (EOTs) are a mechanism to support wider employee ownership in the UK.

A sale to an EOT provides shareholders with the opportunity to conclude a tax efficient exit quickly and smoothly, usually involving less risk for the seller, whilst incentivising the employee base by allowing them to enjoy the fruits of future income and capital growth.

Following the sale, the target business is held in trust on behalf of the company’s employees although certain criteria must be met, such as the EOT holding a controlling stake and its assets being held for the benefit of all employees. For shareholders selling a majority stake, the proceeds are exempt from capital gains tax.

How Napthens can help

Napthens’ team is experienced in advising upon EOT schemes and can offer both sellers and trustee purchasers an affordable way to handle the legal aspects of the transaction.

As a member of the Employee Ownership Association, we understand best practice and can provide practical advice on board structures and best practice around Employee Councils. We can also help to structure EOTs alongside Share Incentive Plans.

We have supported a good number of small and large companies across a wide range of sectors, throughout the process and following completion as the trustees, directors get to grips with their ongoing responsibilities.