Jonathan Stapleton talks to Alan Pickering about why BESTrustees has converted into an employee ownership trust.
Summer solstice - the day with the longest period of daylight in the year - has long been marked by celebrations across the world. Yet, this year's solstice also marked a significant landmark for independent trustee firm, BESTrustees, which completed its conversion into an employee ownership trust (EOT) on 21 June.
EOTs are a form of employee benefit trust introduced by the government in September 2014 in a bid to increase the number of employee-owned businesses - and is a structure that can provide both significant benefits to employees as well as tax benefits to shareholders looking to see their stake in a business.
BESTrustees chairman Alan Pickering says it has always been the firm's aim to ensure the ownership and employment of the business is aligned but notes its share ownership had become concentrated in fewer and fewer hands over the years - a situation that led to discussions as to how the firm could "better align its ownership and workership".
Pickering explains the increased use of professional trustees - either to work with lay trustees, or on a sole trusteeship basis - and the need to recruit to meet that demand are also factors.
He says: "We want to meet those opportunities by refreshing our line-up at a time when some of our experienced people are reducing their workload with a view to hanging up their trusteeship gown and moving on to do other things - the market is changing and we are going to change to meet the needs of that market."
Pickering adds: "We think that offering people employment in a firm which is not simply owned by some of the employees but all of the employees will increase the collegiate nature of the firm. And that increased conviviality will be to the advantage of clients, and will hopefully enhance the quality of the services which we can provide those clients."
The conversion will see 100% of the shares of BESTrustees Limited transfer into an EOT.
Following the conversion, BESTrustees' EOT will be governed by a board of three trustees - Denise Catterall, Clive Gilchrist and Christopher Wheeler. These trustees will be elected by all the employees on a phased basis over a four-year cycle.
The six-strong board of BESTrustees Limited - currently comprised of Stephen Balmont, Huw Evans, Zahir Fazal, Heather McGuire, Rachel Tranter and the firm's chairman, Alan Pickering - will remain largely unchanged as a result of the move, although Heather McGuire will step down at the end of this month to be replaced by Andy Boorman.
As part of the switch to an EOT, BESTrustees will also be setting up an employee forum as part of the move to provide a route for all employees to share their views.
Pickering explains the move: "We've traditionally had good channels of communication with our employees. But we think that establishing an employee forum will provide a slightly more formal conduit through which we can benefit from the views of our employees. Whether those employees are head office support staff or client facing trustees, the employee forum, will bring the views of the workforce to our board in a in a distilled and digestible fashion."
Going forward, BESTrustees Limited will continue to run the business but the EOT's board of trustees will provide the ultimate oversight, providing a "check and balance" to ensure it treats former shareholders as well as current and future employees fairly and also making sure the business holds true to the principles underpinning the trust.
Concluding Pickering says the change in ownership is both timely and symbolic. He explains: "It's timely, because there is an evolution of the generations. But it's symbolic, in that we acknowledge the market for professional trusteeship services is going to evolve and we think the evolution of our ownership structure will equip us perfectly to serve this market into the future."
An employee ownership trust (EOT) is an indirect form of employee ownership in which a trust holds a controlling stake in a company on behalf of all its employees and provides an incentive for owners to sell a controlling stake in their business.
The EOT was introduced in the Finance Act 2014 as part of the coalition government's aim of promoting employee-ownership as a business model in the UK.
It was the result of recommendations put forward by Graeme Nuttall in his 2012 report commissioned by the Department for Business, Skills & Innovation. The review promoted the trust as a relatively simple means of achieving employee ownership, emphasising in particular the need for an off-the-shelf model to appeal to business owners considering succession options.
The EOT - an extension of the traditional employee benefit trust, but with distinctive features and tax advantages - was the government's response.
An EOT must hold a controlling stake in its company and must benefit all employees on an equal basis. However, if structured correctly, there are significant tax benefits - with the original shareholders benefiting from a complete capital gains tax exemption on gains made when selling a controlling interest in a company to an EOT. Employees of businesses owned by an EOT also have an income tax exemption of £3,600 per tax year on certain bonuses issued to all employees.
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