3 min read
There has been a lot of talk about employee ownership sales over recent months – and clearly, there are a lot of misconceptions. Many people regard it as being a ‘soft’ option to hand over a business to employees with no real upside in value to the exiting shareholders. This is not true, as an Employee Ownership sale can provide full financial value to the vendor, the employees, and the business.
So, what is an Employee Ownership sale? In simple terms, it is the sale of company shares to a trust which holds them for the benefit of the company employees. The underlying process that facilitates this can be vendor-led and most importantly, the valuation of the business is agreed on a commercial basis, with no requirement for 3rd party involvement. There is also the advantage that currently such sales attract zero Capital Gains Tax provided more than 51% of the shares are being sold. Unlike an open-market sale, the due diligence is significantly reduced, and the deal can be structured over an agreed time period, allowing the vendor to benefit from maximum commercial value, zero tax and ensuring a smooth handover.
An Employee Ownership sale does not mean that the business is wholly run by the employees going forward. It is also a common misconception that the management need to pre-approve a sale – they do not, it can be entirely vendor led. The new management team will be created based on ability and may include former shareholders, who become employees of the business, enabling them to drive future growth and protect their legacy. For employees, there is the potential to earn tax-free bonuses of up to £3,600 per annum and the knowledge that the trust is acting in their best interests. Selling to a trust can appear complex but Avondale can run the whole service for you, from strategy, legal, trustee and financial, enabling you to concentrate on growing your business, and enjoying the sale rewards.
Evidence shows that employee-owners are highly motivated and that EOT businesses see increased retention of staff and greater productivity. During these times of uncertainty, we believe that Employee Ownership sales provide an optimal solution for vendors – enabling them to exit on a commercial basis whilst ensuring the continued growth of the business, economic contribution and adding to the well-being of the employees.
Please contact us on +44(0)20 7788 8250 or email av@avondale.co.uk for further information.
