You may call it social engineering
« Back to News
Published: 25 Jun 2019
You may call it social engineering, but it can be a good way to sell your company
The solution could be right under your nose
An alternative to using sale brokers to cast your net to find a buyer for your company, you could look to your own employees to take over the company.
Employee Ownership Trust
If this is the route you'd like to take to sell your business, and to obtain tax benefits on sale of the company, then an Employee Ownership Trust (EOT) should be formed to purchase the shares in the company for the benefit of all of its employees, who are to be treated on an equitable basis.
At least 51% of the voting shares must be held by the EOT.
These conditions allow the sale transaction to be treated as free of capital gains tax. This nil rate of capital gains tax is even better than the 10% rate where entrepreneur’s relief applies.
Financing the EOT
Where there is insufficient finance available to the EOT to purchase all of the shares, the EOT can borrow funds from banks or other financial institutions to repay you as the vendor.
You may prefer to defer paymenta of part of the sale price at a lower or nil interest rate in order to guarantee the continuing success of the company.
The John Lewis Effect
The main commercial advantage of EOT is the commitment and loyalty generated by company employees who derive financial benefits from operating the company efficiently.
John Lewis is known for this type of share ownership. This is evident when you go to Waitrose in that the staff seem to be there for you, whereas in some other supermarkets you can feel you are there for the staff.
So all in all it is a win:win:win situation. It's a win for the customers, a win for the employees and a win for the company.
If you require further information on this, email David Cane at or phone David on 07749 080 806 and he will put you in touch with RM2 Partnership Ltd, who specialise in such share schemes.
