Lawyer predicts post-COVID employee ownership boost

A boost to employee ownership in the wake of the coronavirus crisis has been predicted by a solicitor specialising in the field.

Douglas Roberts of Lindsays, who has advised on more than 10 employee ownership deals which have completed in the past few years, believes the model leads to greater business resilience as companies seek to survive the economic shock caused by the pandemic, and that further deals will emerge as businesses evolve as a result. 

He made his prediction to mark Employee Ownership Day (26 June), organised by the Employee Ownership Association to highlight the role that the model can play in establishing local jobs and investment, improving business performance and enhancing benefits for staff.

Methods of employee ownership can range from share options to selected members of staff, to the employees or a trust owning 100% of the company. Since legislation in 2014, most deals have involved the process of more than 50% of a company’s shares being transferred to the staff of that company, often by entrepreneur or family-owned businesses which have no obvious succession plan. Such deals also attract strong tax benefits, as the selling shareholders pay no capital gains tax, unlike with entrepreneurs’ relief.

Mr Roberts, a director in Lindsays' Corporate team, commented: "The impact of coronavirus has exposed the need for businesses to have greater financial resilience. Employee ownership provides that, meaning it will undoubtedly become even more prevalent as companies stabilise their position and plan growth as part of post-pandemic plans. We are helping clients with a number of EO deals and are currently dealing with a number of enquiries. We expect demand to increase.

"Holding a stake in the place you work creates a different mindset among staff – and I’ve heard throughout coronavirus how working to a common purpose has spurred innovation, performance and productivity. A recent survey of employee-owned companies by Ownership Associates reported that 73% of them believe their EO model will ensure they see the COVID-19 crisis out. These are factors which many businesses, particularly family ones, cannot afford to overlook.

"We are already seeing real changes to the relationship between workers, employers and government – meaning that the influence of employee ownership should grow as the economy is reset to ensure it’s fit for purpose."