B E N C H M A R K I N T E R N AT I O N A L
THE SALE STRUCTURE OF AN EMPLOYEE OWNERSHIP TRUST
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Benchmark International
THE SALE STRUCTURE OF AN EMPLOYEE OWNERSHIP TRUST An Employee Ownership Trust (EOT) describes a collective that owns the majority stake in a company, with the aim of retaining it for the longterm benefit of the employees.
THE STRUCTURE OF THE SALE Once the EOT has been established it will need to be governed by a detailed trust deed. Trustees include executive directors from the company, as well as employee representatives who have been elected by an Employee Council and perhaps the seller and/ or an independent professional trustee. The seller will sell the shares - more than 50% in total - to the EOT, with the majority being paid by the EOT on a deferred basis. The EOT is funded from the company’s on-going profits, and it will use the funds that it receives in order to pay the seller over time.
The EOT itself has no assets, and no means of generating assets – so whilst it is the buyer of the majority of the shares, it is reliant on other sources to pay for these shares. One of the main advantages of an EOT is that there is no capital gains tax for shares transferred to a trust of this type. This capital gains tax relief applies to all sellers that dispose of their shares to the EOT in the same tax year that the EOT acquires the controlling stake.
Benchmark International
TA X A DVA N TA G E S O F A N EOT
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F o r f u r t h e r i n f o r m a t i o n a b o u t E O Ts , v i s i t the Benchmark International blog.