About employee share ownership through an employee trust
An employee trust, often called an employee benefit trust or employee ownership trust (ESOT), may be an important component in your company’s employee share scheme.
- If you have employees wishing to sell shares (or having to sell if they leave), then an employee trust may be a useful way of recycling them: buying them in and then re-allocating them to other employees. This may be less of an issue if your company is listed, as it may then be straightforward for the employees to sell their shares in the market.
- If your share scheme is a SIP, you will need to operate a trust as the SIP rules require that employees’ shares are held on their behalf in a special trust.
- If you wish to create employee ownership in your company (i.e. the whole, a majority or a significant part of it is owned by, or on behalf of, its employees), then you may also need to set up an employee trust.
Whilst trusts can play a very useful role in the operation of an employee share scheme, anti-avoidance legislation means that care is needed in the use of a trust (or any third party) to provide shares or other forms of benefit to any employees.