More Scottish businesses than ever are deciding to become staff-owned, according to a veteran adviser.
Lindsays attorneys have been involved in nearly twice as many employee share ownership deals across the country so far this year as they were in 2021.
Speaking as part of Employee Ownership Day today (FRI), Douglas Roberts, a partner in the firm’s Corporate team, said there were no signs of a slowdown in this trend, with the Scottish government pushing for 500 employee-owned businesses (EOBs) to be based in the country by 2030.
And he believes the rise will add another layer of resilience to the country’s economy as businesses face challenges including rising costs.
Lindsays, who has offices in Edinburgh, Glasgow and Dundee, advised on five transactions which saw companies become employed in 2021 – following 15 others in the previous four years.
The company has already entered into nine employee ownership trust (EOT) agreements this year, many of which have paved the way for new sectors.
Mr Roberts said: “We are seeing huge demand from companies interested in, and then becoming, employee owned. In addition to the transitions we have completed so far this year, a number of other agreements are in the works. This is really encouraging for the Scottish economy.
“More and more companies are realizing that employee ownership can work for them. It’s clear from the companies we’ve been involved with that this is a model that can work for any size business.
“It’s a model that benefits everyone.
“For employees who become employee shareholders, they secure a majority stake in their future. For those looking to sell their business, it allows them to secure the future of their business while managing their departure in a way that works for them.
Recent figures from Co-operative Development Scotland (CDS) revealed that there are currently 195 EOBs in operation in Scotland, with 146 registered in Scotland and 49 registered non-Scottish.
The deals Lindsays has been involved in so far this year include one that saw Edinburgh-based Kidzcare become what is believed to be the first company in the Scottish childcare sector to go employee-owned .
Others include those who saw the Inverness-based Carlton Bingo chain and the Glasgow-based music industry giant come under the ownership of EOT.
Organized by the Employee Ownership Association, EO Day highlights the economic and social benefits that can be achieved when employees have a stake and a say in their workplace. The theme this year is #GrowEO.
Research after the 2008 credit crisis found that employee-owned companies outperformed non-EO companies – a factor that could prove important in the current financial climate.
Mr. Roberts added, “The knowledge that employees of EO companies have that their destiny is in their own hands can be a powerful factor in motivating them to ensure the success and sustainability of their business. They benefit directly from this success.
“As a result, they often stay together and work harder for each other. This encourages innovation, as well as improved performance and productivity. As the number of employee-owned businesses grows, this will add an increasingly important layer of resilience to the Scottish economy.
Employee share ownership: Highlights
- A business is defined as employee-owned if there is employee ownership of at least 25% of the business without a majority shareholder.
- There are different levels of EO, from stock options to selected staff members to employees or a trust that owns 100% of the business.
- Due to legislation introduced in 2014, most EO transactions involve the process of transferring more than 50% of a company’s shares to that company’s staff. This is usually done by entrepreneurs or family businesses as part of their succession plans. They also benefit from significant tax advantages.
- When a company converts to employee ownership, subject to meeting certain requirements, selling shareholders do not pay capital gains tax. Due to Business Assets Disposal Relief (formerly Entrepreneurs’ Relief), most shareholders pay CGT at 10% on the first £1 million of a sale, meaning someone who sells a business for £1 million pounds sterling, for example, walks away with an extra £100,000. .