EOTs: The Credible Alternative To Succession

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Background: The use of Employee Ownership Trusts (EOTs) by private companies has seen a considerable rise in 2020 and is expected to continue in 2021. A well-run employee-owned company could benefit from a longer-term business strategy and not have to consider the conventional exit routes of a trade-sale or a flotation, with the EOT giving the alternative succession opportunity. In turn, a more engaged and more secure workforce could lead to higher productivity and profitability. The business ethos that lies at the heart of the EOT is that it is set up to hold shares on behalf of all the employees of the company. As a business succession tool, supporting the sale to an EOT, the transaction is free of capital gains tax and facilitates income tax-free bonuses to employees. The EOT structure is, therefore, a formidable element within a management buyout arrangement. The most tax-efficient and motivation-maximising EOT will require a structure that allows the EOT to work alongside the tax-advantaged tax approved employee share schemes, possibly with linkage to meaningful and measurable performance conditions.

The Key Headline Advantages of the EOT for Exit:

(1) Zero capital gains tax for the selling shareholders;

(2) No trade-sale acquiring company required for the exit;

(3) Income tax exemption for bonuses to employees;

(4) Establishing the independence of the company in perpetuity;

(5) Security of employment for the employees going forward;

(6) Can work alongside traditional employee share schemes.

In this talk, employee share schemes expert, David Craddock, will demonstrate how the EOT has become the credible alternative to succession.

Speaker: David Craddock is an independent consultant specialising in employee share ownership and reward management. A recognised authority on the subject, he is the author of The Tolley’s Guide to Employee Share Schemes , along with many other essential books and courses. David’s clients range from major public limited companies with international considerations to smaller private companies where the requirements are for Enterprise Management Incentives, tax-unapproved share scheme arrangements and market-making employee share trust structures. David has successfully established employee share schemes and employee benefit arrangements worldwide and to date has travelled to over 30 countries to personally facilitate their introduction. He enhances his service through a long experience in share reconstructions and share valuation.

Thursday, 27 May 2021

15:00 - 15:45 BST


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  • david Craddock.jpg
    David Craddock
    Founder & Director
    David Craddock Consultancy Services
  • Ian Harris
    Ian Harris
    Z/Yen Group Limited

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