Corrie's Carla Shares the Wealth in Weatherfield

8th August 2019 Corporate

Since Carla’s return to the cobbles of Coronation Street, she has made a decision that has fundamentally changed the structure of everyone’s favourite underwear factory. Carla has sold the majority of her shares to a trust for the benefit of the employees. “Underworld Factory„ has become an Employee Ownership Trust (EOT).

Carla’s gesture means that machinists like Beth, Sinead and Sally will own part of the business that they’ve devoted so many years to. This will ensure that they are suitably rewarded for ensuring that Weatherfield’s residents continue to wear the finest local lingerie available.

But what exactly is an EOT?

EOTs were introduced with the aim of increasing diversity of business owners across the UK. These structures give owners of entities, like the Underworld Factory, the opportunity to transfer a majority stake of the company to a trust. This can be up to 100% of the shares, so long as it is more than 50% of the shares. That portion of the shares will then be held on trust for the benefit of all its staff.

What is the benefit for the employees?

As a result of establishing an EOT, employees will have a share in the direction, success and profits of the company going forward through the trust. They will also be entitled to receive certain bonuses without being charged income tax.

How do EOTs benefit business owners like Carla?

Existing business owners, like Carla, are given significant tax advantages to incentivise them to transfer part or all of their business to existing employees. The amounts that they receive for selling their shares will not be subject to corporate gains tax. This provides a greater tax saving than that provided by, Entrepreneurs Relief, for example.

As well as this significant tax advantage, this structure can ensure long term protection of the legacy and ethos of the company. Whether, like Carla, business owners are completely exiting the business, or they are transferring just part of their shareholding for the benefit of their employees, the level of disruption that seeking a third party buyer may cause is likely to be minimised. In addition, the need to identify a suitable external buyer will no longer be required.

JMW and EOTs

We are finding that, whether on Coronation Street or closer to our Spinningfields offices, more and more business owners are investigating the option of becoming an employee-owned business. Although we did not act for either Carla or Underworld in the transaction described above, the corporate team at JMW has recently advised on establishing a number of EOT arrangements.

For advice on establishing an EOT, the requirements that must be met or a conversation on how we can assist your company, please contact JMW Solicitors LLP on 0345 402 0001.

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Sam Ballin is a Solicitor located in Manchesterin our Commercial LitigationSports Law departments

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