How are EOT's created?

1. Discussions will be held between the shareholders and their tax and legal advisors, to ensure the EOT is fit for purpose, and that future employee incentive solutions will be appropriate and possible.

2. The trading company will be valued by share valuation experts to determine the purchase price, and appropriate clearances will be sought from HMRC.

3. A qualifying EOT will be established along with a trust deed, with trustees appointed either as named individuals or a Trustee Company.

4. The shareholders sell their shares to the EOT under a share purchase agreement. As there is no external purchaser party, so the usual third-party negotiations and potential delays will largely be avoided.

5. On the sale of the shares, the purchase price will create a debt owed by the EOT to the shareholders, which may be settled with a combination of existing cash in the trading company, and loan notes. The trading company will continue to generate profits each year and it will use these profits to make contributions to the EOT to repay the outstanding purchase price to original the shareholders.

6. The exiting shareholders may continue to be involved as directors and/or trustees, to ensure a smooth transition, particularly while there is consideration still outstanding.