What Happens at an EOT Trustee Meeting?
When a company becomes employee owned through an Employee Ownership Trust (EOT), a board of trustees must be appointed to act on behalf of the trust and its beneficiaries: the company’s employees. The board of trustees will meet regularly, often quarterly, to carry out its duties.
If you’re a prospective trustee, you may be thinking, “I’ve agreed to be a trustee… what will actually happen at a trustee meeting?” This blog explains what you can expect at trustee meetings in general and what is likely to happen at the inaugural trustee meeting, as it is usually quite different from later meetings.
This is the third instalment in our Trustee Blog Series. The first blog explained the role of a trustee of an EOT, including their duties and responsibilities. The second, explained how to structure an effective EOT trustee board. If you are a prospective trustee or new to the role, you may find it helpful to read those blogs first.
What happens at the first EOT trustee meeting?
The first formal meeting of the trustees will usually take place on the day the EOT is established. This is also often the same day that the business becomes employee-owned.
Once the trust has been established and the trustees have been appointed, the trustees will need to approve the purchase of the company. Although this is one of the first decisions the trustees will make, it is usually the biggest decision they will make in their role. Before the transaction can take place, it must be approved by the trustees. The trustees will therefore need to carefully consider matters including:
- whether it is in the best interests of the beneficiaries for the business to become employee owned;
- whether the proposed purchase price and other terms of the transaction are fair; and
- the governance arrangements for the trust and the company going forward.
Because these are such important and fundamental decisions to the transition, the trustees should be given the opportunity to consider and agree the key points in advance of the meeting itself. The decisions will then be formally recorded at the first trustee meeting. It would be usual for a lawyer who has been helping with the transition to employee ownership to attend the first meeting and guide the trustees through the process.
What is a usual EOT trustee meeting agenda?
Once the first trustee meeting has taken place and the transaction has been approved trustee meetings will usually follow a more standard format. It is recommended that trustee meetings usually take place two to four times each year.
Although no two trustee meetings will be exactly the same, most companies will establish a standing agenda.
This is likely to cover:
- a trading and financial update. This may include a written report, management accounts, key performance indicators, a budget report, or a combination of these documents. This will usually be provided in advance so that the trustees have an opportunity to review it, identify any issues, and prepare questions for discussion;
- a review of the strategic plan, although this may not be needed at every meeting;
- any matters which require trustee approval. This may include, for example, a bonus payment to employees or, if relevant, whether the business is in a position to make the next payment instalment to the sellers;
- a broad update on employee matters. This may include an update on leavers and joiners, employee engagement, and any feedback received from employees;
- any other business which the directors have asked the trustees to consider; and
- administrative arrangements, including:
- who will produce the meeting minutes;
- any matters to be taken forward to the directors, employees, or the next trustee meeting; and
- agreeing a date for the next meeting.
Interim EOT trustee meetings
Interim meetings may be called to deal with specific, time-sensitive matters requiring trustee consent. For example, the business may need to make an urgent strategic or financial decision that cannot wait until the next scheduled trustee meeting. However, this is unlikely to be a regular occurrence. If such a meeting is called, the agenda will usually be limited to the matter at hand, and you would not expect to go through the standing agenda items unless they are relevant.
How to get the most out of EOT trustee meetings
- Timing – it is important to have an agreed schedule, for example quarterly meetings, so that meetings take place regularly and everyone knows when they need to be available. A fixed schedule also means that the directors know when they need to have the relevant documents prepared. However, there should still be flexibility to call interim meetings if needed.
- Attendance – where possible, fix meetings for dates and times when all trustees are available to attend. Usually, everyone will bring a slightly different perspective to trustee meetings, so having as many trustees as possible in attendance is beneficial.
- Preparation – ensure that any documents which will be referred to at the meeting are received well in advance. This helps the meeting run more effectively because it gives the trustees time to review the papers, consider the issues, and form an initial view before the meeting.
- Purpose – remember that trustee meetings are not intended to duplicate board meetings. The trustees are there to oversee the EOT’s interests, not to run the company day to day. Keeping this distinction in mind during discussions will help the meetings stay focused.
- Record-keeping – keeping a record of key discussions and decisions can be helpful to refer back to, especially when there are a few months between meetings. Minutes are also useful for new trustees, as they provide background on previous decisions and the reasons for them.
How we can help
If you are considering an EOT, have recently become an EOT-owned business, or have been asked to act as a trustee, we can help you understand what is expected and how to put the right processes in place. We advise companies and sellers on EOT transactions, provide independent advice to trustees, and deliver practical trustee training so that trustee boards feel confident in their role from the outset.