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What is the Employee Ownership Trust?

24 January 2022

This articles briefly summarises the usual role and responsibilities of the Employee Ownership Trust in hybrid and indirect ownership trust structures

When setting up a trust-owned structure (for more on the different structures available for employee ownership, see here) an employee ownership trust will be created by way of a trust deed, which sets out the terms by which the trust must be operated.

The trust itself will be operated and run by its trustees.  The role of the trustee is to manage the assets of the trust (in this case, the shares in the company) for the benefit of the beneficiaries as a whole (in this case, the employees of the company).  The trustee role is therefore not to manage the underlying company, this remains with management and the directors, but instead is to influence the management team to ensure that the company is being led in the best way possible and that they are maximising the engagement and experience of the employees.

We would always advise that the trustee itself is a corporate body, usually a newly incorporated company limited by guarantee, and that the governing documentation (trust deed and articles of association) include provisions for the appointment of the directors of this new trust company, who will act as trustee directors and carry out the role of the trust.  The reason we advise this is a corporate, instead of a group of individuals, is that it makes ownership and management of the assets held by the trust significantly easier and cheaper to maintain.  The shares are put into the name of the trustee company and remain there notwithstanding any change in its directors.  Its directors are usually known as trustee directors to distinguish them from the directors of the underlying company.  This allows the trustee directors to rotate, retire and be added to from time to time with little administrative burden other than updating the company's statutory books and making the necessary filings at Companies House. It also means that signing any documentation is much simpler than if you have many individual trustees.

If you wish to read more about the interplay between the trust and the management team who will continue to run the company, please see our article on the effective running of an employee ownership company here [BD – Hyperlink to published Article 6]

 

If you would like to discuss any aspect of this article further, please contact Mike Ford, Malcolm 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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