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Welcome to Seminar EO1
“What is employee ownership, what benefits does it deliver, which
businesses does it suit, at what stage of business can it be used and
what are the different models?”
Facilitated by:
Arend Welmers - Great Game UK
Panellists:
Robert Postlethwaite - Employee Ownership Lawyers
Ewan Hall - Baxendale
James Kempton - Saxton Bamfylde
Case Study:
Kevin McDonald - Stride Treglown
Arend Welmers
Great Game UK
#EOAConference
Robert Postlethwaite
Postlethwaite Employee Ownership Lawyers
#EOAConference
What is Employee Ownership?
Ownership?
• Share of profits
• Capital growth?
• Control/influence over who runs the Company and its direction
• Responsibility
• Empowerment
Employee Ownership
Employees
Business
Own majority of shares or significant stake
Not Employee Ownership
• Management team only e.g. share options for a limited number of key people
• Small amount of shares for all employees
• Employees only have non-voting shares, so control is with others
Thank you
This is me:
Robert Postlethwaite
020 3818 9420
www.postlethwaiteco.com
9 Staple Inn, LONDON WC1V 7QH
Ewan Hall
Baxendale
#EOAConference
Employee Ownership Models
Indirect Ownership – EBT / EOT
13
Direct Ownership - Shares
14
Mixed Model
15
What is an Employee Ownership Trust?
• Discretionary Trust for the benefit of employees
• Can hold shares and other assets on behalf of employees
• Is a separate legal entity
• Can act as a shares “warehouse” and market maker – and part of your governance structure
• Can qualify for certain tax reliefs:
If you sell a majority of shares to an EOT the sellers will not need
to pay Capital Gain Tax
If the EOT holds a majority of the shares, the company can pay
annual bonuses of up to £3,600 per employee free from income
tax (but not NICs)
16
Individual Shareholdings
• Can be held directly or through special HMRC approved share schemes
• Allow employees to:
Share in any increase in value of the business
Share in profits through dividends
Vote on certain matters
Access to certain information (e.g. accounts)
17
James Kempton
Saxton Bampfylde
#EOAConference
EO Transition EOA Conference – Birmingham 2015 James Kempton – Finance Director
Retail / Consumer
Iconic UK institutions
Charities
UK Government departments
Regulation
Differently owned
Where Public Meets Private
Media & Publishing
Education
Industrials
Financial & Professional Services
International development
Illustrative Example of Top clients
over past 15 years
John Lewis Alfa Travel
BP HSBC
Barclays Telegraph
Harper Collins Pearson Ashurst Tesco
The Restaurant Group Aquascot
United Utilities
~ Our Mission ~ “We exist to change the world by
changing leaders in interesting and important organisations. At the same time we aim to create an environment wherein all members can grow to their fullest extent emotionally, intellectually
and spiritually.”
Sale or Merger EBT
– WHY DID WE DO IT? –
– How did we do it? –
• Guardian of values & culture
• Meets 2-4 times a year
• Check & balance to Board
• Consultation on major issues
• Confirms partnership bonus
at year end
• Ability to confirm, terminate
board appointments
THE TRUST REPRESENTS THE PARTNERS
– THE TRUSTEES –
• Sets & delivers the strategy
• Runs & manages all
operational activity
• Sets the required budget for
Saxbam to operate
• Manages company
performance & profitability
– THE BOARD –
THE BOARD RUNS THE BUSINESS
In
– TRUSTEE VOTING – • The Trustees are those people you want to
represent you
• Voting kicked-off before Company Lunch on 2
July at OQS. Ballot boxes and confidential
voting
• Postal votes for those not at Company Lunch
• All partners have 3 votes; 1 from each
community
• All partners are expected to be available as
trustees (exceptions)
• Trustees announced at Away Day 21 July
1. Get good advisers from the outset – EO transition, tax and legal
2. Consult with other EO organisations 3. Over communicate with staff and give
them a voice 4. Simplicity - beware of clever share
schemes
– THE TRANSITION
–
TOP TIPS
End of year 1 reflections: changing behaviours
PARTNERSHIP
=MAKING A DIFFERENCE
Kevin McDonald
Stride Treglown
#EOAConference
Stride Treglown widening Share ownership Kevin McDonald – Managing Director
The Practice top ten UK architects practice
formed in 1953
310 members of staff
£23m projected turnover (2015)
controlled growth
no significant borrowings
The Challenges – Succession Planning
traditional methods of acquiring shares no longer viable.
taking more directors to buy out a retiring director
increasingly top heavy structure not sustainable
attempts to widen share ownership not working
clusters of directors looking to retire at the same time
15% 15% 15%
2015 2016 2017 2018 2014 £2.5M
we were in the proverbial and needed a plan
groping around in the
dark was good for us…
a closer relationship between effort and reward
reinforce the ethos of the company
plan for the long term
more efficient distribution
of profits
a fairer system
remain in control of
of our own destiny
broaden the
‘partnership’ culture employee owned
companies perform better
create a financially
sustainable and
independent business
What do we value?
integrity quirkiness
autonomy freedom
decision
appoint
advisors
agree brief
gauge reaction +
modify
‘soft start’
consultation
(internal exercise) (with external consultants)
Surgeries across
the business
tax
specialist +
lawyer
valuer
trustee
solicitor
accountant
EBT
SIP
company valuation
corporate documentation
trust documentation
Initial issue of
free shares
employee
forum
establish
engagement
plan
coordinated
suite of
documents
The Process
us + them we’re in it together let’s share everything
What control do we want?
maximum profits for
individuals; limited
ownership distribution
Sell? yes no
prepare for
sale
Stay as is: 98%
of shares owned
by 5% of
employees
Sale to
3rd party
Silent
partner
2 tier
board
Broader
based
‘partnership ‘
Collective
ownership shared
with all employees
>25% < 50%
shares
distributed
outside the
board to
employees
Set up a trustees
board - employees,
directors +
executive trustee s
(outsiders)
trust buys back all
shares from
existing directors.
Business can
never be sold
Trustee board
determines which
employees run
the business
100% 0% employee owned business
Relinquish
control
Relinquish
some control
Relinquish
control
2 tier board to run the
business + trustees to look
after the employees interests
Retain control Relinquish
some control
(free / partnership /
matching shares)
new or existing directors
buying or selling shares
£££
s i p
trust (with independent
trustee who has
voting rights)
NON-DIRECTORS
SHARE DISTRIBUTION Company
provides extra
shares and
funding for EBT
or SIP acquisition
shortfalls by way
of a gift
Shares
distributed
through and
regulated by the
employee trust
DIRECTORS
staff buying or selling shares
staff not interested
(share options)
e b t
forum Consulted by
trustee on
certain matters
that effect the
value of their
shares or sale of
company
(elected employee
representatives)
Safeguarding employees investment
shares valued annually by an independent valuer
directors held accountable by independent trustee
employee forum input into the development of the company
Lessons learned
1. decide what you want & where you want to end up
2. select your advisors carefully
3. make yourself available to communicate the changes
4. share details on company’s financial performance regularly
5. don’t under estimate the levels record keeping required
12 months on
91.7% staff positive about
Stride Treglown widening
employee ownership
95% of staff are interested
in buying shares in the
future.
1st issue of partnership
shares oversubscribed by
114%
Questions and Discussion
#EOAConference
Thank you
Please make your way to the Palace Suite for
refreshments
