Funding for Employee Ownership Trusts

Empowering employees, growing businesses

Whether you want to introduce an employee ownership scheme to improve engagement, provide added benefits for your staff or exit the business, we can help you achieve this transfer of ownership.

Our experienced team arrange funding for a wide range of scenarios, including acquisitions, buy-outs and restructures. We work with advisors, accountants,  SMEs, sponsors and trusts and create bespoke solutions to support businesses and provide financial stability as they transition to Employee Ownership Trusts (EOT). 

Find out how we recently helped Retrac Group accelerate their EOT here.

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What is an Employee Ownership Trust?

An Employee Ownership Trust (or “EOT”) enables exiting owners to transition ownership of a business to their employees, leaving it in experienced hands while also rewarding and motivating the employees who become co-owners.

Eligible employees will indirectly own the business, and will collectively be beneficiaries of the trust, receiving financial benefits that would typically be given to shareholders.

The exiting owners can remain involved with the business (continuing to own up to 49% of the share capital), enabling them to help plan for the future without making any immediate or dramatic changes in management.

Since its introduction by the Government in September 2014, the EOT has become an increasingly popular option for exiting owners given the wide range of benefits it can provide to the business, its exiting owners, and its employees.

What are the key benefits of Employee Ownership Trusts?

  • Enable eligible employees to indirectly hold shares in the company whilst providing tax benefits and assisting with succession planning for business owners
  • Greater employee engagement and commitment
  • Directors can remain in the business, receiving market competitive remuneration post-sale
  • Potential for improved business performance and reduced staff absenteeism
  • Tax (CGT) relief for sellers with no IHT liabilities
  • Original shareholders can retain an interest in business with only majority stake transferred to EOT
  • Tax free bonuses (up to £3.6k pa.) allowed for employees

How do Employee Ownership Trusts work?

EOT buy-outs are often funded through deferred consideration based on future profitability. This means that shares are sold by the shareholders on a deferred payment basis, with instalments being paid over a period of time. By using external finance, it is possible to speed up access to these funds for the selling shareholders and therefore fast-tracking the EOT.

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Funding for EOTs at a glance

Our funding is available for UK based Limited companies with experienced management and employee teams.

  • Commercial Loan facility, with term typically 3-5 years
  • Capability to provide funding to the trust, the operating company or a combination of both
  • Repayment: amortising and bullet profile with initial capital holidays available 
  • Security: senior all assets debenture, additional security may be required
  • Corporate structure must meet Employee Ownership Trust requirements:
    • EOT must acquire and retain a controlling shareholding in the company
    • Company must be a trading company or holding company of a trading group.
    • EOT must be set up for the benefit of all eligible employees on the same terms
    • Number of people who are directors or employees and who continue to hold at least 5% of the company’s shares after the transition must not exceed 40% of the total number of employees
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The benefits of working with us

  • EOT buyouts are often funded through deferred consideration based on future profitability. Our facilities speed up the access to these funds for the selling shareholders
  • Support from team experienced in business transitions with industry experience and understanding of EOT principles and related market factors
  • Fast-track ownership transition with upfront funding for the EOT whilst maintaining stability and cashflow in the business
  • Quick decisions with short lines of communication direct to decision-makers
  • Our solutions can combine funding for the EOT buy out as well as the next stage of growth in the business
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How do I find out more about Employee Ownership Trusts?

At Shawbrook we have worked with a number of businesses as they transition to an EOT.  Read about how we supported precision engineering firm and F1 supplier, Retrac Group, here.

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Contact us

If you are considering an EOT for your business or advising a client on their potential transition to employee ownership, then get in touch today to see how we could help.  

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