MAKING IT HAPPEN
In this transition process, everyone from sellers to employee owners play a vital part in making it happen. In this section you will find specialist training, advice and the ‘nuts and bolts’ of the process.
The transition period is in two parts (a) the preparation and contractual time leading up the final transaction, and (b) the first year as the business evolves from a stake-holder controlled business into an effective employee owned business.
The key to a successful ownership culture is educated employee owners. Owning a business brings rights and responsibilities, as well as risks and rewards.
RIGHTS, RESPONSIBILITIES, RISKS AND REWARDS
To have more access to information, to influence the direction and leadership of the firm
To ensure the company is as successful as it can be
Business can be challenging. Ownership means taking the pain when things get tough, and working together to resolve problems
When the company is doing well, employee owners can share in the wealth created
MAKING IT WORK
There is no one model of employee ownership; the beauty of the structure is that it can be designed and adapted to suit the aspirations of the owner, the needs of the business and the ambitions of the employees.
Guiding you through The Key Elements
Making the transition work is all about attention to detail. We will work with you to ensure the appropriate attention is focused on these vital elements:
You must decide on the structure – how much of their shareholding do the owners want to divest? Is there appetite for a share scheme? Most companies will hold the majority of shares in an Employee Ownership Trust.
Several effective funding options are available. Most employee ownership transactions are funded by the company ie the purchase price is paid from company profits. Most companies don’t maintain sufficient cash reserves to fund the entire sale price. This means that the seller receives payment for their shares over time.
Some companies seek external financing to fund at least some of the value. This can be from one of the mainstream institutions, such as the company’s bank. There is also a growing number of specialist lenders who lend specifically for employee ownership transactions.
What’s important is that we arrive at a valuation that the seller is happy with, and that the trust is comfortable with paying.
If there is sufficient time and resource available, some companies find the formation of a Transition or Employee Buyout Team to be useful. This is a group of employees, drawn from different areas of the business who work on the business transfer project. This group undertakes to read the documentation, contribute to discussions on the shape of the company under employee ownership, and manage communications within the organisation.
This just isn’t possible in some companies and it’s best to explain the plans at a company meeting and follow this up with workshops and group discussions. It’s worth emphasising there is no disadvantage for employees in the company taking this route; it is risk free for employees. Investing time in explaining all of this goes a long way in erasing people’s fears about the changes ahead.
Not a lot changes when the company moves to employee ownership. Indeed, this is one of the attractions for owners who sell to their employees; it’s possibly the least disruptive succession option there is!
The company’s board remain legally responsible for the business, and the company’s management continues to ensure that tasks are executed efficiently, customers are happy, and sales keep coming in.
The main difference in terms of governance structure is that the company is now owned by a Trust. There will be trustees appointed who will make sure that the board operates in accordance with the trust deed, and acts in the best interests of the employees as beneficiaries. It’s usual for one or two of these trustees to be non-board employees.
DEVELOPING AN OWNERSHIP CULTURE
We also spend a bit of time exploring what employee ownership will look like. What’s the best way to deliver information to the employee owners? How can employees make their voices heard? How can we really make the most of our employee ownership structure? It’s when people think, feel and act like owners, that you see transformational results.
HOW LONG CAN IT TAKE?
Our record is 6 weeks from initial conversation to signing the completion papers! However, that was a very organised business with owners who had undertaken a lot of research before making their decision.
Typically, the business transfer process takes from 3 -6 months. This gives sufficient time to explore the different structures, liaise with shareholders, arrive at an acceptable value for the company and obtain the necessary HMRC tax clearance. It’s well worth investing this time in communicating with and involving employees, because most of them won’t have anticipated being business owners – although there is no personal liability, it can be a daunting thought.
WHAT WILL IT COST?
The importance of obtaining expert advice cannot be emphasised enough. However, Ownership Associates will endeavour to keep costs down and can recommend experienced legal and accountancy advisers who can support the project, delivering the desired outcome, in a way that won’t break the bank.
Companies in Scotland and Wales may be able to access free support in exploring and implementing employee ownership.
Have a broader understanding of employee ownership. Gain an insight into how to assess company performance Be better informed on the workings of trusts and share schemes. Have new and tried & tested ideas on making ownership work.
Return to the workplace energized and enthused.
What People Say About Us
Don’t just take our word for it, here are some quotes from people we have guided through the vision, transition and fruition of employee ownership.
Ask the Experts
As you move through our website you will be able to access our special Ask The Experts Forum where you will be able to get obligation-free advice pertinent to your particular circumstance.
Let's Make It Happen
You can get things started. It’s all about your vision, your options, your tax benefits, discovering what’s involved in the process and fleshing it out to ensure you achieve what you want.
Useful Resources and Downloads
Our Resources are regularly updated with informative videos and downloads for you to use.