The benefits of Employee Benefit Trusts (EBTs) or Employee Share Plan Trusts (ESPTs) are so often focused on those which come about as part of the typical cycle:
- Company grant
- Awards vest a few years down the line
- Shares are sold/transferred
- Taxes are paid and the employee then holds their benefit as shares or cash
What we do not see comparatively is every employee benefitting equally as a result of both a takeover and an investment into the EST as requested by a founder.
Employee Share Plan Trusts for takeovers
In 2011, JTC Employer Solutions set up an ESPT for a private company (the Company) for whom the total share capital was being acquired by a private equity firm.
The original founder of the Company had stipulated a condition of the sale that some of the equity be put into trust for the long-term benefit of the employees.
On establishment, the ESPT quickly acquired shares in the Company, held on an unallocated basis for the benefit of the employees.
Fast forward to 2022 and the Trust now holds various classes of shares in the Company further to interim activity and two transactions take place sequentially:
- A standalone sale of some of the trust shares, the proceeds from which are used to satisfy two sets of cash awards of £1000 to all employees (the Beneficiaries), to help them through the cost of living crisis. We have seen many companies consider making similar recommendations in recent years and it’s always positive to see an ESPT help to provide an additional benefit in difficult times.
- The Company was subject to a takeover bid by a NYSE listed multinational Incorporation. This required a lot of engagement and consideration by the Trustee, Company and their respective advisors, eventually resulting in the sale of all shares held by the Trust and subsequent settlement of pre-agreed cash awards, which resulted in a payment of c.£19,000 to around 1,000 employees.
In effect, the use of this ESPT ensured that beneficiaries shared in the company’s success.
A celebration of success
There are two main points we hope you take away from this success story. One is just how beneficial having an Employee Share Plan Trust can be and, with 160 currently supported by JTC, how grateful we find employees are when they are in place.
The other is, if you have one in place already, are you making the most of it?
If you would like to talk through either of these considerations, please do get in touch and we will work with you and your advisors to ensure that your ESPT is serving its beneficiaries as well as they are serving you.
It is worth noting that of course we generally want our ESPTs to run for as long as possible and continue to provide benefits year in, year out; but if the end of the Trust life looks like this, we can rest assured that the Trust has fulfilled its purpose. An added bonus of course is when the ESPT is able to continue providing benefit, or if we are able to set up a new ESPT, perhaps for the new parent company.
Client feedback
Following the transaction, we were gratified to have received the following survey responses from the client:
“The team, especially Steph, was so responsive and flexible. It was a great help at a very … uncertain time – Steph’s calm and constructive approach was exactly what we needed… navigating a major payout of our EBT at a time of huge change for our business was very demanding. The Trustees were able to address each of our queries and the nuances in our set up, giving the necessary confidence to all stakeholders on the steps for the Trust.”
“Thanks to Steph de Carteret and Matt Carter for exceptional service, not least staying up to a ridiculous hour in support of our late night exchange over a weekend during the sale of the business. Absolutely fantastic service from both, going above and beyond.”
At JTC, the ethos is very much centred on Employee Ownership and our EBT and Share Plans have benefitted all employees on numerous occasions, so we truly do understand just how important they are.
