Employee Ownership is where the whole or part of a Company is owned by, or on behalf of, its employees. The government introduced some new and relatively generous tax reliefs for employee-owned companies in 2014 and since then Employee Ownership Trusts (“EOT”) have become an increasingly popular exit route for owners of trading companies. A business owner choosing to sell a controlling interest to an EOT may be eligible for exemption from capital gains tax.
Hi-Tech Automation Limited (“Hi-Tech” or “the company”), an automation and robotics company based in Kettering, in their transition to Employee Ownership (https://hitechautomation.com/).
The founders were keen to find a suitable succession strategy, whilst providing a secure future for the company and their employees. Hawsons were able to provide a solution that was both tax efficient and gave the workforce an opportunity to participate in and benefit from ownership of the company they work for.
12 months later, Hawsons caught up with Hi-Tech’s Managing Directors, Gary Probert and Ricky Thompson, to get their thoughts on the company’s journey so far. Below is what they had to say.
Q Did you have any preconceptions about a what a move to employee-ownership would involve/mean?
A. Yes, I have always thought that building a business is like owning any asset, disposal of the company due to a lack of family members with the relevant technical background has made us think about this as we near retirement age. A controlled migration from asset to cash with a minimal Tax exposure as possible is all part of retirement planning. I could see the benefits that being part of an EOT would bring to the long term success of the company and skilled individuals involved.
A I think like anything of this type they wanted to know “What’s the Catch?”. Anything that looks too good to be true generally has some hidden implication.
A The transition has been seamless, if you have a successful business model then nothing really changes from private ownership to the EOT. It strongly signposts to everyone internally and externally that your business has a long term future, you have a plan and you are focusing on those who want the business to be as successful as you have.
A One year on its business as usual, the recruitment of employees becomes very focused as they are your long term future and investment. Everyone now knows, the decision made effect everyone’s future and we openly discuss this with key stakeholders.
A If you don’t like the idea of selling your business privately then I strongly recommend a valuation with a view to seriously considering an “EOT”. The process was straight forward with the right advisors.
Q Would you recommend employee ownership to other companies?
A I would recommend an EOT to any entrepreneur with a profitable business, I have discussed our transition to an “EOT” already with several companies that we have had long term relationships with. Whilst our driver was mainly our age and long term planning, this transition could be done at any point in time to realise the value of your asset.
