Gilson Gray LLP, Scotland's largest new full service law firm, has recently completed its first ground breaking Employee Ownership Trust arrangement – believed to be the first of its kind in Scotland.
Employee Ownership Trust (EOT) was introduced by the Finance Act in April this year as an innovative way of encouraging businesses to become employee owned through enhanced tax benefits.
Gilson Gray advised Mike Stoane Lighting on the introduction of an EOT. The deal saw 45 staff in the Edinburgh-based business benefit. The company now has an employee on the board of directors, following the decision by founder Mike Stoane, to step away from the day to day running of the business.
Derek Hamill, Head of Corporate at Gilson Gray, said the UK government encourages employee ownership because businesses tend to be more successful, competitive, profitable and sustainable if employees are engaged within the business.
Derek said: "Until now, the people who own a business, the shareholders, would have paid capital gains tax on what they made from their share sale.
"The lowest rate available has been 10%, provided the seller qualifies for entrepreneur's relief. However, as an incentive to allow the creation of EOTs, a transfer of shares into the Trust qualifies for a full exemption from capital gains tax – the seller pays no capital gains tax at all.
"With the right support and advice, the move to employee ownership can be straightforward and an easy path steered through the regulations. We have the expertise, experience and knowledge, plus a network of trusted accountants and bank contacts, to make structuring a deal as painless as possible."
Businesses who engage in an EOT can enjoy higher employment standards, better involvement of staff, more engagement with the business, lower absences and more productivity.
This is thought to be because of the simple fact that if employees have an ownership stake in their business, then they have an obvious pride and incentive in seeing it succeed.
Emily Alston, a director at Mike Stoane Lighting, said: "We are one of the first businesses in Scotland to use the Employee Ownership Trust, which now holds a majority of our shares – 65%.
"The formation of the Trust put in place a new legal structure which has secured the long-term future of the business; the challenge going forward is to demonstrate to staff the benefits of having a greater stake in the business to allow us all to develop the excellent potential of Mike Stoane Lighting.
"For new recruits in particular, this initiative is very appealing because we can offer them the chance to be not just employees, but also owners.
"We would absolutely recommend the EOT to other businesses. It is a sustainable business model and a viable succession option with great benefits for all."
Gilson Gray is a new law firm with offices at 29 Rutland Square, Edinburgh and 160 West George Street, Glasgow.
It has partners who are experts in all commercial disciplines, many of whom are dual-qualified in Scottish and English law, and the firm is supported by a full complement of legal, property, financial and administrative staff.