SALE OF COMPANY TO EMPLOYEE SHARE OWNERSHIP TRUST
This alternative to the classic management buy-out enables the shareholders of a trading company to sell their shares free of CGT to a trust set up for the benefit of the employees. This has become more popular as an exit route since the lifetime limit for CGT business asset disposal relief (formerly entrepreneurs relief) was reduced from £10 million to just £1 million.
This tax break has recently been used by the owners of a number of well-known companies including Richer Sounds and Riverford Organics, and is similar to the structure in place at John Lewis.
Like business asset disposal relief, the company must be a trading company. The outgoing shareholders are only allowed limited participation in the company following the disposal of their shares. There are a number of other conditions that need to be satisfied. If you are interested in going down this route, contact us to discuss whether it would be suitable for you or your company.