Plan your exit. Protect your legacy.

An Employee Ownership Trust (EOT) lets you exit your business on your terms and reward the people who built it with you, whilst helping keep your legacy intact.

RM2 has advised businesses of all sizes, in all sectors on employee ownership for more than 20 years.

Most business owners assume that when the time comes, a trade sale is the obvious exit route.

It’s familiar, it’s straightforward, and it gets the job done.

But for founders who’ve spent decades building a team, a culture and a reputation, it often doesn’t feel quite right; because it isn’t. There’s another way – a better way for many – and it starts with employee ownership.

This guide explains what it is and how it benefits all concerned, without jargon and without obligation. If it resonates and you want to discuss it further, we’re here for you.

At RM2, our people own our business and we’re here to help employees own theirs.

Focusing purely on EOT’s and employee share schemes, we provide the full service to secure the future of your business.

Your business should be financially stable, profitable and have a strong capable management team. You need to be willing to receive the deferred purchase consideration over a few years.

An individual who holds 5% or more of the shares in a company is known as a “Participator”. If Participators make up more than 40% of employees the company will not meet the requirements to become an EOT. Employees connected with a Participator are also counted as Participator.

For example: Boggs & Daughters Ltd has 12 employees, with 2 shareholders, Mr and Mrs Boggs, holding 50% of the share capital each. Mr and Mrs Boggs employ their 2 daughters, and a nephew, in the business. Mr & Mrs Boggs are Participators and, by family connection, so are the daughters and the nephew. Hence there are 5 Participators. The Participator Fraction is 5/12 = 41%. Boggs & Daughters Ltd will not qualify for an EOT.
To become an EOT you must sell more than 50% of your company to the Employee Ownership Trust. The Trustees then become the majority shareholder and will be responsible for acting in the best interests of all employees. However, the board of directors of the company does not need to change (unless you want it to) and remains responsible for the day-to-day management of the company.
The EOT is usually financed by a mixture of cash from the balance sheet & a vendor loan, guaranteed by the company with the lenders taking a charge over the company’s assets (3rd party finance can also be arranged). The loan is normally repaid from the company’s future profits, on average over the next 5 to 7 years. RM2 provide all the loan documentation as part of the transaction process.
Normally there is part payment on completion of the transaction, with further instalments paid out in accordance with the vendor loan agreement. We will provide you with a Feasibility Study which will provide detailed modelling outcomes based on forecast post-tax profits to deliver a realistic timeframe for the payments.

“I have worked with RM2 for many years, and during this time, they have consistently demonstrated exceptional professionalism and expertise… They help navigate complex Employee Ownership issues with their in-depth knowledge and strategic advice. I highly recommend their services to anyone seeking reliable and knowledgeable Employee Ownership support”

Rachel Berry
Finance Director

Start a conversation

As an employed owned company, RM2 knows what it takes to successfully shift the future of a business – we’re here to help others own it too.

Through our specialist expertise, we help private business owners take their next steps into whichever shared ownership choice is right for them.

If you would like to know more about the support we offer to help you introduce employee ownership in any of its forms, book a call and let’s start the conversation.

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