How can EOT's benefit my company?

Advantages to outgoing shareholders

There are many advantages for shareholders, some of which we’ve highlighted below.

It allows employees to indirectly buy the company from its shareholders without them having to use their own funds -thereby creating an immediate purchaser and addressing succession issues.

Shareholders can sell their shares for full market value (an independent valuation will be required).

3. Not all existing shareholders are required to sell their shares, and the exiting shareholders can remain involved either with the management of the business or as trustees.

If structured correctly, and as long as qualifying conditions continue to be met post sale, there is no tax charge for the exiting shareholders selling a controlling interest in the company.

5. The directors can remain in situ post-disposal and can continue to receive market-competitive remuneration packages.

6. The EOT is generally seen as a “friendlier purchaser” which means the sale process may be quicker, with potentially lower fees.

Advantages to the company and employees

As all employees get an indirect stake in the company there are substantial practical benefits associated with being owned by an EOT, such as:

Greater employee engagement and commitment which can lead to reduced absenteeism.

Greater drive for innovation and improved business performance, driven by employees who are invested in their company’s success.

3. Companies controlled by EOTs are also able to pay tax-free cash bonuses to their employees of up to £3,600 per employee per year.

Although a tax-free bonus of £3,600 may not be enough to retain and incentivise the management team, with careful forward planning both Enterprise Management Incentive options (EMIs) and growth share incentive schemes are still possible with EOTs, without breaching the trusts “same benefits for all” or limited participator requirements.