Employee Ownership Trusts are the vehicle used to create ownership in the hands of employees . Importantly the business is run for the benefit of all employees in the long term. The EOT will appoint a board of directors in the same way the shareholders and a private limited company appoint a board. It is important to ensure that control has passed from former ownership to the EOT should a transaction take place.



The 5 Step Process

Dains supports businesses contemplating employee ownership through a five step process.

1. Planning

We work with clients to consider alternative ownership structures, which may include, trade buyers, private equity, management buy outs and employee ownership. Employee Ownership is not appropriate for every business and it is sensible to consider all alternatives before committing to a transaction, despite the generous tax treatment for outgoing shareholders. We strongly advise against the creation of an EOT structure, simply to create a tax efficient exit for shareholders.

2. Deal Design

We work with clients to create a management and financial structure that works, long into the future.

3. Valuation

It is important that all stakeholders are confident that the business has been valued fairly, before a change of ownership. We produce detailed valuations, where appropriate and also provide a commentary on third party valuations to build understanding amongst outgoing shareholders and new trustees of the EOT.

4. Cashflow Modelling

Successful transactions are achieved when the trading entity is not cash constrained, following a transaction. Working alongside our clients, we will produce a financial model containing the proposed deal structure and a range of trading scenarios, depending upon the client requirements.

5. Execution

We work alongside legal advisors, funders, and tax advisors to complete the transaction. In most transactions, Dains tax team will liaise with HMRC to ensure the transaction has received HMRC clearance well ahead of completion.

Dains are members of the Employee Ownership Association and can share a wide range of resources for businesses considering a change of ownership.