Tag Archive for Succession Planning

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Pros and cons of employee ownership trusts (EOTs)

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Originally written by Anna Jordan on Small Business
Employee ownership trusts (EOTs) are relatively new in the business world.
The EOT survey 2019 shows that there are 241 verified EOT-owned companies and a further 34 EOT-owned companies that have been established for longer, otherwise known as ‘deemed EOTs’. Between the two, EOTs employ 23,000 people in the UK.
It’s a popular model in the manufacturing and professional services sectors. A large proportion are represented in London and Scotland, with virtually none in Northern Ireland.
Over half (55 per cent) of EOTs own the entire company; a further 40 per cent are hybrid models in which the EOT is a majority owner alongside employee shareholders and/or founders.
BDO predicts that a combination of Covid-19 and a rise in Capital Gains Tax (CGT) mean that shareholders are becoming increasingly likely to sell off companies before the end of the 2020/21 tax year.
We’ll explain just what an employee ownership trust is and the pros and cons of transitioning to this model.
What is an employee ownership trust?
An employee ownership trust is a specialist form of an employee benefit trust, introduced by the government in 2014.
With an employee ownership trust, shareholders are encouraged to sell their shares into a trust

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What happens when a small business owner dies?

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Originally written by Partner Content on Small Business
The sudden death of a business owner may destabilise a business and can quickly lead to financial difficulties. Surviving business owners could lose control of a proportion or, in some circumstances, all of the business. The family may choose to become involved in the ongoing running of the business or could even sell their share to a competitor. This is where Shareholder Protection Insurance steps in.
According to financial advisers, Drewberry, half of small businesses do not have the legal structures needed to make sure they can buy a colleague’s share of the business from their family when they die. For many SMEs, that means the possibility of losing control of the business.
Only 43pc of business owners have any business life cover in place in the event of their death or incapacity.
What is Shareholder Protection Insurance?
Shareholder Protection Insurance allows the remaining partners or directors to remain in control of the business following the death of a business owner. If there is no share protection in place, the owner’s share in the business may be passed to family members uninvolved in running the business.
A share protection policy can help avoid these issues by providing the

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Breaking the family circle – taking a fresh look at succession planning

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For generations family businesses have been the backbone of the economy, supporting job creation, innovation and enterprise across the UK. However, when the time comes for the current leadership team to hand on the baton to the next, the decision of whether to pass down responsibility to a family member or to appoint outside expertise
The post Breaking the family circle – taking a fresh look at succession planning appeared first on Small Business.

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