Employee Ownership

Reviewed September 2025

Introduction

Companies considering including employees in their ownership structure have a number of options available to them. They would be well-advised to invest some time in reviewing the available structures, the various advantages and disadvantages and their own priorities, in the light of their current and future business needs and circumstances. This note briefly sets out some of the structures available.

Our team of expert solicitors routinely advise clients on a variety of employee ownership based schemes, including advising companies within IT, manufacturing and events sectors in deals with a value up to £50 million. This is a complex area of law and you should contact us for advice on your specific circumstances.

This briefing note should not be relied upon as legal advice

Why might a company consider including employees in its ownership structure?

 Various factors could be of relevance, including:

• strategic reasons, such as succession planning. For example, a family company may wish to remain independent but, if there are no family members who are willing to be involved in the business in the future, a transfer of some or all of the ownership to employees might be a solution;
• incentivising or rewarding employees in a different way to standard salary or bonus procedures i.e. by giving employees a share in any growth in the company’s value and/or annual profits;
• tax efficiency. This could be on the part of the selling shareholders or the company in respect of tax-advantaged arrangements for employees; and/or
• promoting employee retention and fostering a culture of employee loyalty.

What models are available?

Broadly speaking, there are two models for employee ownership:

1. Employees can acquire shares in the company personally, which they might then be able to sell at a later date. Such shares may have voting and/or dividend rights attaching to them. Enterprise Management Incentive Schemes (EMIS) or Growth Share Schemes are examples of such individual employee ownership schemes.
2. Shares can be held on behalf of employees on a long-term basis in an employment benefit trust or employee ownership trust.

Enterprise Management Incentive Schemes

Enterprise Management Incentive Schemes (EMIS) are an employee share option, which enjoy favourable tax treatment. There are complex requirements to be complied with, including in relation to the company whose shares are used and the employees to whom options are granted.

Please see our briefing note on Enterprise Management Investment Schemes for a brief overview.

To help businesses understand the various EMI scheme requirements, we have compiled a complimentary guide. This sets out useful details on EMIS, including summarising the eligibility criteria, the different types of EMIS available and the key steps a company will need to take before introducing an EMIS.

To receive our guide, please email any of the following: Mark Williams, Beth Jones or Christiana McKeown.

Growth Share Schemes

Growth shares are tax efficient structures which a company may wish to offer to its senior employees or directors in order to allow them to invest in the company for a low initial amount and participate in the company’s future growth.

Please see our briefing note on Growth Share Schemes for a brief overview.

To provide further details on Growth Share Schemes, we have compiled a complimentary guide. This includes details on how Growth Share Schemes may be put in place, including the typical rights attaching to such growth shares, and the key considerations when deciding if such schemes are appropriate for the company.

To receive our guide, please email any of the following: Mark Williams, Beth Jones or Christiana McKeown.

Employee Ownership Trust

There is a growing trend towards companies forming employee ownership trusts (EOTs) and employment benefit trusts due to the generous tax reliefs on offer for selling shareholders. The process involves the formation of a trust that acquires the controlling interest in the company, which is held on behalf of the employees of the company as a whole.

Please see our briefing note on Employee Ownership Trusts for a brief overview.

To provide further details on EOTs, we have compiled a complimentary guide. This includes details on how EOTs work, the tax reliefs that may be available, as well as setting out some practical advantages of shareholders selling a controlling interest in a company to an EOT.

To receive our guide, please email any of the following: Mark Williams, Beth Jones or Christiana McKeown.

Conclusion

Employee ownership is a key tool in engendering loyalty and retaining staff. There are various ways of achieving this; however, it may be that ownership is not desired by the company or the employees. Other means of achieving loyalty and retention may be available (e.g. bonuses) and you should contact us to discuss these options further. Whatever arrangement is put in place will require careful legal drafting and implementation.