Keeping your workforce motivated and inspired is one of the biggest challenges many modern businesses face, with the aftermath of Covid-19 making things more difficult.

Making your company employees owned can assist in many areas, including increasing productivity, recruiting new employees, and having a happier, more motivated workforce. Additionally, becoming employee-owned can help current owners sell all or some of their shares at market value as part of an exit or succession planning strategy.

What is employee ownership?

Employee ownership is usually achieved by establishing an employee ownership trust (EOT) that owns all or most of the shares in the company on behalf of the employee.

This form of ownership is becoming increasingly popular as it allows companies to remain independent, rewards employees’ hard work, and allows departing shareholders to receive their full value for their company.

How is it achieved?

After valuing the company and establishing employee trust, shareholders get in touch to sell their shares to EOT trustees.

Funding for the transaction comes from the trading company, which contributes capital from its reserves. Typically, a portion of the sale proceeds will be paid on completion, with the balance paid over some years from future profits. Alternatively, a company can borrow to finance a transaction, although any payment depends on whether the company has enough distributable reserves.

Based on the company’s leadership is unchanged and still managed by the board of directors. However, most employee-owned companies will create some kind of employee forum for employees to participate in, and these representatives will provide information to trustees of the EOT, who looks after employee rights.