Employee Ownership Trust – EOT

For an increasing number of business owners, selling their business to an Employee Ownership Trust (EOT) can provide several valuable benefits

Firstly, it is highly tax-efficient; business owners can sell their shares without paying any Capital Gains Tax, provided they transfer at least a 51% stake. Additionally, employees benefit directly, as they can currently receive annual bonuses of up to £3,600 free of income tax.

Beyond financial incentives, an EOT sale can help protect the company’s legacy and identity. Owners can ensure that their business continues to operate independently, preserving its unique culture and values, rather than being acquired by external investors who might restructure or split up the company.

Moreover, transitioning to employee ownership often significantly boosts staff motivation and retention. Employees become indirect co-owners, fostering a deeper sense of responsibility, loyalty and productivity. This ownership culture typically enhances job satisfaction and innovation across the workforce.

For owners considering retirement or stepping back from daily management, an EOT can offer a smooth succession strategy. It provides flexibility to phase their exit gradually, funded through company profits, which reduces reliance on external financing and avoids the potential disruption of an abrupt sale.

Knowing whether an EOT is right for you is critical – it may not suit every business sale.

For example, it’s less suitable if you need an immediate full payment, as EOTs usually involve deferred payments funded by future profits. In addition, an EOT typically offers a conservative valuation, so it might not achieve the highest possible sale price compared to trade buyers or investors. And it’s also challenging without strong management, stable profitability, or genuine employee enthusiasm.

Is an EOT right for you and your business?

We provide advisory support to guide a business owner through initial evaluation of EOT versus a trade sale, and if this is your chosen route, full support in preparing the business for transition and guiding the business owner through the sale process.

To deliver the final company sale, we work in conjunction with one of the south’s leading commercial legal firms, Steele Raymond LLP, and valuation support from independent chartered accountancy firm Ward Goodman.

If you are considering whether an EOT is the right solution for your needs, please call us for an informal and private discussion or fill in the form below.