Using employee benefit trusts for employee ownership

Graeme Nuttall

Partner, Field Fisher Waterhouse LLP

UK Government Independent adviser on employee ownership

Email: graeme.nuttall@ffw.com

Co-operative Education Trust Scotland

31 May 2012

•Unprecedented Government support

•Role of independent adviser

•Informal consultation

•Obstacles

•Solutions?

Employee ownership

Unprecedented Government support

• Nick Clegg, Deputy Prime Minster’s announcement on 16 January 2012 at Mansion House:

“...of a new Government drive to introduce the concept of employee ownership into the mainstream British economy”

• Norman Lamb is leading the cross-Whitehall work to investigate how Government can support this growing business model

• The Mutuals Taskforce under Julian Le Grand and the Cabinet Office led by Francis Maude are promoting employee led mutuals

• The reform of Royal Mail and its transformation into an organisation in which staff have a meaningful stake

• HM Treasury internal review of employee ownership

Role of independent adviser

• A new role

• The remit is to:

"work with Government to identify the barriers to employee ownership and help find the solutions to knock them down”

• The independent adviser is asked to make his recommendations to Government in a report presented to Norman Lamb

• The answers and solutions will be brought together at a summit chaired by the DPM on 4 July 2012

• Part-time and unpaid

• Does not provide advice on specific cases or take any executive decisions - he may continue to advise clients

Informal consultation

• Organised by Department for Business, Innovation & Skills (”BIS”)

email: employeeownership@bis.gsi.gov.uk

• Key questions:

• What are the barriers?

• What are the solutions?

Obstacles?

Consistent themes, include

• Lack of awareness of the concept of employee ownership

• Information is often completely misunderstood

• There can be resistance due to fixed ideas about ownership models

• There is a lack of awareness of the solutions that already exist

• There may be a fundamental problem with access to finance to implement employee buy outs

• There are complexities in the legal structures needed to implement and maintain employee ownership.

• There probably are material obstacles in how the tax system applies

Lack of awareness

Solutions?

Raise awareness

Solutions?

Increase resources and reduce complexity

• Use of an employee benefit trust (“EBT”)

John Lewis Partnership

plc & subsidiaries

John Lewis PartnershipEmployee

Benefit Trusts

Solutions?

Donald Insall &

Associates Limited

Employees

Wilkin & Sons

Employee Benefit Trust

Individuals as trustees

Founder’s family etc.

Employment

Beneficiaries

Shareholders