Corporate Finance Services for your Business
Preparing for your business succession
THE LEGAL BITS
The tax benefit is often a key motivator for any owner who wishes to sell their business to an employee ownership trust (EOT).
The structure is important to meet all the requirements and ensure the vendor receives the tax relief and also gives meaningful employee ownership.
There are three requirements that the EOT structure must meet:
- All employees must benefit;
- Benefits must be on an equitable basis; and
- The trust must have control (more than 50%) over voting rights and profits.
The fundamental issue to address at the very beginning is this: The owner is unlikely to be paid in full for a number of years because the consideration is through vendor loans or deferred consideration, so it is not unfair to require control of the company over that period. It is totally understandable and comes back to my pint about having a saleable business before this route is chosen.
The EOT has to take over from the start in which case there needs to be mechanisms to give assurances to the vendor which comply with those requirements.
This is the main difficulty in putting these arrangements into place.
Let’s go back to square one – if you, the owner, have made the decision to sell then an EOT is viable. However if you have not made that decision, then an EOT may not be the answer you are looking for.
These notes are intended to promote discussion and debate and are not put forward by way of definitive advice and should not be relied upon without seeking further advice in relation to any specific matter.
Whilst every effort has been made to ensure the accuracy of the notes, no responsibility can be taken by the writer and Assynt Corporate Finance Limited, for the consequences of any actions taken or refrained from being taken in response to these notes.
It is recommended you seek specialist advice, from Assynt Corporate Finance Limited or another suitably qualified professional adviser, in relation to any specific client matter.
The law and HMRC practices are summarised as they are understood to have effect as at 1ST May 2019.
Andrew is the director of Assynt Corporate Finance Limited and an Accredited Member of the Association of Crowdfunding experts.
Previously a partner and head of corporate finance at Baker Watkin LLP, Andrew has more than 35 years of experience in all forms of corporate finance across many business sectors.
Andrew is also the Chair of Governors at a local school and an Assessor of Expeditions for The Duke of Edinburgh’s Award.
You can find out more and connect with Andrew over on LinkedIn.
Need Help? Contact Andrew at Assynt:
If you are serious about selling your business, contact Andrew to arrange an informal chat, in person or over the telephone to assess the options open to you.
You can also contact Andrew by email at: firstname.lastname@example.org or by completing the form on this page.