Do you want to transfer ownership of you company to your employees?

In an employee-owned company, the majority or a significant equity stake in a company is held by or on behalf of its employees, normally on a widespread basis so that all or most staff have a stake in their company.  This is in contrast to most businesses where the employees together hold shares or options over a minority interest in their company, with the majority being held by founders and investors.  If you are thinking about retiring or succession planning you may want to consider making your business an employee-owned company.
 
Employee ownership entails a more significant level of share ownership by employees than is commonly found.  Ownership in most businesses is normally split mainly between founders and investors, with, at most, a limited percentage being available for employees.  However, companies which are employee-owned account for approximately £20 billion annual revenues in the UK (source: the Employee Ownership Association). 
 

Companies which are employee-owned

In the John Lewis Partnership, the company's shares are all held in a trust and the company is run for the benefit of its employees. Arup, the international engineering business, is also employee-owned. Employee ownership is enjoying growing popularity in a wide variety of business sectors and situations, including delivery of public services and succession in owner-managed businesses. Research evidence suggests that the performance of employee-owned companies, whether measured on a quantitative or qualitative basis, is strong and sustainable, and that wider employee ownership could bring significant economic and social benefits to the UK.
 

Employee ownership can take several forms

The main forms of employee ownership are:

• All employees together hold 100% of their company's shares
• Ownership is shared between employees as direct shareholders and an employees' trust (advantages of creating an employee trust may include: facilitating a transfer to employee ownership; tax savings; ensuring that the company remains employee-owned in the long term; helping operate a market in the company's shares)
• 100% of the company being held by an employee trust
• Employees and/or an employee trust hold a controlling interest, other shares being held by outside investors or other shareholders
• Employees and/or a trust initially holding a minority stake, but with the intention of acquiring a majority stake over time

 
We have worked with many companies that have chosen to become employee-owned, helping them identify the ownership structure that works best for them and then taking responsibility for its implementation. We are seeing a growing interest in employee ownership and a significant increase in our assignments involving advice in this area.  To learn more please look at our Guide to becoming an employee-owned company and our other Resources.  You can find out much more information about employee ownership from the Employee Ownership Association.

If you are interested in discussing how employee ownership might work in your own business, please contact us.