Discussion
Not sure whether this is the right forum but are there any genuine employee ownership trusts arrangements out there? The two EOTs I’ve got knowledge of are blatant tax evasion. After the EOT they carried on exactly as they were pre-EOT with the same family management in charge, no employee benefits and no employee control.
I was involved in one, where basically they sold the business to the business for a massively inflated price, saddling the business with a huge debt, continued to manage it, trustees were absentee at best and given the debt there were none or slim benefits for being in the EOT.
I seen it coming, some poor sods got super excited so felt massively let down.
I seen it coming, some poor sods got super excited so felt massively let down.
Hobo said:
Quite simply an exit strategy for owners golf businesses where getting an external buyer is highly unlikely.
So yes, a tax reduction scheme at best, but why not. A lot of the people involved have built the businesses so why shouldn t they personally gain from their sale .
I don’t disagree with this at all, what I can’t stand is that they are so often spun as some sort philanthropy to the benefit of the employees or indeed sometimes junior partners. So yes, a tax reduction scheme at best, but why not. A lot of the people involved have built the businesses so why shouldn t they personally gain from their sale .
Yes there are ones where employees genuinely benefit.
I’m a trustee of an EoT, the business was originally sold/financed into the EoT a mid point of 2 independent valuations and approved by HMRC. The original founder/owner and driving force stayed on as the salaried MD. He kept it alive thru Covid (50% drop in revenue) and built it back up to surpass previous revenues and increase profit by 50%. The bank debt was 50% paid down.
The business was doing so well, a bid was made by a Scandinavian investment co that had a track record of buying profitable and sustainable SME’s and growing them. It had not resold any acquired business in the previous 20 years so offered good long term employment prospects for the staff (as a trustee this was a key factor in the decision to sell).
So, the money - it was sold to the investment co for c80% more than it entered the EoT (total sale value was double digit £M’s), every employee received a payout, the guy on living wage sweeping the warehouse floor cried when he was told he was getting over a £100k. The employees got between £30k and £200k based on contribution factors we were able build in as trustees. I’m still a trustee as we have c£1m of retention bonuses to pay to the employees over the next 2 years.
As a trustee the due diligence was obviously in-depth at all stages, and the employee interests were always at the core of decision making. We over ruled the MD on a number of points.
So yes, the founder/company owner took his £M’s out of the business when the EoT was formed, but he built it from scratch over 30 years, employed 40 people, and worked like a dog to make sure his employees got what were in some cases almost life changing sums of money based on where they were in life at the time.
Trustees receive no financial gain btw.
I’m sure there are sh!t EOT’s just like there are good and bad in most aspects of life, but don’t assume all are just a back door for the ‘owner’ to take easy cash and shaft employees.
I’m a trustee of an EoT, the business was originally sold/financed into the EoT a mid point of 2 independent valuations and approved by HMRC. The original founder/owner and driving force stayed on as the salaried MD. He kept it alive thru Covid (50% drop in revenue) and built it back up to surpass previous revenues and increase profit by 50%. The bank debt was 50% paid down.
The business was doing so well, a bid was made by a Scandinavian investment co that had a track record of buying profitable and sustainable SME’s and growing them. It had not resold any acquired business in the previous 20 years so offered good long term employment prospects for the staff (as a trustee this was a key factor in the decision to sell).
So, the money - it was sold to the investment co for c80% more than it entered the EoT (total sale value was double digit £M’s), every employee received a payout, the guy on living wage sweeping the warehouse floor cried when he was told he was getting over a £100k. The employees got between £30k and £200k based on contribution factors we were able build in as trustees. I’m still a trustee as we have c£1m of retention bonuses to pay to the employees over the next 2 years.
As a trustee the due diligence was obviously in-depth at all stages, and the employee interests were always at the core of decision making. We over ruled the MD on a number of points.
So yes, the founder/company owner took his £M’s out of the business when the EoT was formed, but he built it from scratch over 30 years, employed 40 people, and worked like a dog to make sure his employees got what were in some cases almost life changing sums of money based on where they were in life at the time.
Trustees receive no financial gain btw.
I’m sure there are sh!t EOT’s just like there are good and bad in most aspects of life, but don’t assume all are just a back door for the ‘owner’ to take easy cash and shaft employees.
Veesix75 said:
Yes there are ones where employees genuinely benefit.
I m a trustee of an EoT, the business was originally sold/financed into the EoT a mid point of 2 independent valuations and approved by HMRC. The original founder/owner and driving force stayed on as the salaried MD. He kept it alive thru Covid (50% drop in revenue) and built it back up to surpass previous revenues and increase profit by 50%. The bank debt was 50% paid down.
The business was doing so well, a bid was made by a Scandinavian investment co that had a track record of buying profitable and sustainable SME s and growing them. It had not resold any acquired business in the previous 20 years so offered good long term employment prospects for the staff (as a trustee this was a key factor in the decision to sell).
So, the money - it was sold to the investment co for c80% more than it entered the EoT (total sale value was double digit £M s), every employee received a payout, the guy on living wage sweeping the warehouse floor cried when he was told he was getting over a £100k. The employees got between £30k and £200k based on contribution factors we were able build in as trustees. I m still a trustee as we have c£1m of retention bonuses to pay to the employees over the next 2 years.
As a trustee the due diligence was obviously in-depth at all stages, and the employee interests were always at the core of decision making. We over ruled the MD on a number of points.
So yes, the founder/company owner took his £M s out of the business when the EoT was formed, but he built it from scratch over 30 years, employed 40 people, and worked like a dog to make sure his employees got what were in some cases almost life changing sums of money based on where they were in life at the time.
Trustees receive no financial gain btw.
I m sure there are sh!t EOT s just like there are good and bad in most aspects of life, but don t assume all are just a back door for the owner to take easy cash and shaft employees.
That’s a heart warming tale and the original owner sounds like a genuine guy. I suspect these cases are few and far between and the majority are set up in favour of the owners. One of the two I know is a second generation family company that has used EOT as a blatant CGT evasion scheme. They could have sold the company on the open market but to evade CGT they saddled the company with debt to pay them out so there is no employee benefit, no communication about an EOT so no one knows the structure of it e.g. who the trustees are and there’s no change in control. Most government schemes are easy to abuse but this one seems like open season.I m a trustee of an EoT, the business was originally sold/financed into the EoT a mid point of 2 independent valuations and approved by HMRC. The original founder/owner and driving force stayed on as the salaried MD. He kept it alive thru Covid (50% drop in revenue) and built it back up to surpass previous revenues and increase profit by 50%. The bank debt was 50% paid down.
The business was doing so well, a bid was made by a Scandinavian investment co that had a track record of buying profitable and sustainable SME s and growing them. It had not resold any acquired business in the previous 20 years so offered good long term employment prospects for the staff (as a trustee this was a key factor in the decision to sell).
So, the money - it was sold to the investment co for c80% more than it entered the EoT (total sale value was double digit £M s), every employee received a payout, the guy on living wage sweeping the warehouse floor cried when he was told he was getting over a £100k. The employees got between £30k and £200k based on contribution factors we were able build in as trustees. I m still a trustee as we have c£1m of retention bonuses to pay to the employees over the next 2 years.
As a trustee the due diligence was obviously in-depth at all stages, and the employee interests were always at the core of decision making. We over ruled the MD on a number of points.
So yes, the founder/company owner took his £M s out of the business when the EoT was formed, but he built it from scratch over 30 years, employed 40 people, and worked like a dog to make sure his employees got what were in some cases almost life changing sums of money based on where they were in life at the time.
Trustees receive no financial gain btw.
I m sure there are sh!t EOT s just like there are good and bad in most aspects of life, but don t assume all are just a back door for the owner to take easy cash and shaft employees.
What department are supposed to police these schemes as clearly the solicitors are employed by the owners and don’t have the desire to overcome the conflict of interest.
Work for an EO business. Bonuses to the employees have been large and consistent. General working conditions are good. We did have an occasion where the workforce voted a managing director out of the door at an AGM so it can be very powerful when used correctly.
Attended the annual EO conference last month, the typical business was a small firm of lawyers or architects.
What you've described above does sound like someone sailing through loopholes but there are plenty of EO businesses around working well.
Attended the annual EO conference last month, the typical business was a small firm of lawyers or architects.
What you've described above does sound like someone sailing through loopholes but there are plenty of EO businesses around working well.
Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff