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How does employee ownership safeguard the future of the business – is it sustainable?

02 July 2021

A look at the key characteristics of a robust employee-owned business and how this should be managed for a successful future.

A move to employee ownership for a business is always focussed on the long-term success of the company and its continued improvement.

Employee-owned businesses, when structured and managed appropriately, are able to channel the energy, commitment and abilities of the employees into an improved culture where everyone in the business shares the "all in this together" mission and has everyone working towards a common purpose.  This mission allows employee-owned businesses to weather difficult times more readily than other corporates.

Anecdotal evidence from the crisis caused by the Covid-19 pandemic have shown that employee-owned businesses were able to handle the downturn and challenges raised better than others and are heading into the recovery in stronger positions as a result.

Good governance of an employee-owned business is built upon proper communication, transparency, and planning, with all employees able to see and understand where the business is going and what the key challenges are.  Use of employee councils and/or employee representatives in larger businesses allow additional avenues of ideas to be taken advantage of, further evidencing why the collaborative nature of an employee-owned business can have a positive impact.

The employee ownership trust can be the forum for considering not only the financial performance of the business as shareholders, but also employee engagement and whether directors are properly observing their s.172 Companies Act duty to have regard for the employees of the business.

When structured correctly the financial obligations relating to paying the outgoing owner for their shares do not impact heavily on the business, so sustainability is considered from day one.  The process of moving to employee ownership involves taking advice not only from solicitors, but also the company's accountants to ensure that the financial plans are viable to support both payments to the former owners and the continuing success of the business.

If you would like to discuss any aspect of this article further, please contact Mike FordMalcolm Lynch or any other member of the Employee Ownership team on 0113 244 6100.

You can also keep up to date by following Wrigleys Private Client team on Twitter here.

The information in this article is necessarily of a general nature. The law stated is correct at the date (stated above) this article was first posted to our website. Specific advice should be sought for specific situations. If you have any queries or need any legal advice please feel free to contact Wrigleys Solicitors.

Mike Ford View Biography

Mike Ford

Solicitor
Leeds

Malcolm Lynch View Biography

Malcolm Lynch

Partner
Leeds

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