There are 3 main approaches to selling your business to your employees.
Which one you take depends on your business or exit strategy aspirations as well as the expectations you and your employees have from the move to employee ownership.
Employee ownership is based on an allocation of shares that represent the employee’s interest in the company. As per any shareholding, 51% share in the company corresponds to a controlling interest.
Direct share ownership
Employees are allocated, or allowed to purchase shares in the company. This gives them direct ownership of the shareholding, voting and dividend rights attributed to those share types. You can impose limits on how, where and when employees can buy and trade shares.
Employee owned trust
With this model, a proportion of shares in the company are held in the trust on behalf of the employees. They do not own any shareholding directly, but will nominate employees to be directors of a trust company and represent their interests.
This is often referred to as the ‘John Lewis’ model as it’s similar to the way the partners in John Lewis and Waitrose exercise ownership.
A hybrid approach
The hybrid model is a mixture of an employee owned trust and individual share ownership. The trust approach ensures that all employees are represented and benefit from ownership. The option (or obligation) to purchase shares ensures that employees have a real investment in the business.
Gripple and its parent employee owned company Glide, a very successful manufacturer based in Sheffield, have used this approach particularly well.
Would you like to speak to somebody about employee ownership?
Please contact Business Wales by calling 03000 603 000 and quoting ‘EO2019’. We will be happy to arrange an informal discussion with one of our Social Business Wales employee ownership experts.
Download our guides to share plans and benefit trusts for more information on employee ownership models: