The Group that owns toy brands The Entertainer, Early Learning Centre and Addo Play has taken the decision to become an Employee-Owned Trust (EOT), with the owners transferring their 100% ownership in parent company TEAL Group Holdings to their employees (through an EoT).
Becoming an EOT is not unique, and there are many successful examples. Probably the best known EOT in the UK is the John Lewis Partnership, which is one of the biggest and oldest EOTs in the world. Founded in the late 1800s, it transitioned to full employee ownership in 1950 and currently has 95,000 employee-owners. At John Lewis, indirectly, all employees are owners on the first day of employment. But what are the benefits of EOT?
EOTs are aimed at promoting employee ownership by giving business owners the opportunity to sell their shares free from capital gains tax (subject to compliance with the strict EoT rules and criteria). The shares are sold to an employee-owned trust. EOTs do not involve direct share ownership by employees who do not pay for shares on the way in and they are not bought out when they exit. Instead, employee-owners receive a percentage of ongoing profits throughout the duration of their employment but this will depend on the way in which each of EoT is set up.
For business owners there are many advantages of an EOT. It allows an exit where there is no obvious third party purchaser, and can provide a less adversarial and streamlined exit route for shareholders. The owner can retain some involvement (up to 49%) and it allows a tax free disposal by UK individual shareholders (subject to the various EoT rules).
EOTs are becoming ever more popular, and there is even now an Employee Ownership Association. Its Chief Executive states that EOTs help to futureproof beloved brands, root jobs in local communities and inject wealth into regional economies.
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Speak to our Employee Ownership Trust solicitors today
For initial advice about EOTs, selling, or exiting a business, complete the form on this page, contact our Corporate Commercial team by email company@bishopandsewell.co.uk or call us on +44 (0)20 7631 4141.
Alternatively, you can email Ionut Florin Tihulca, Associate Solicitor, directly by emailing itihulca@bishopandsewell.co.uk.
