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What is an employee buyout?

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If you are thinking of transferring ownership to your employees, find out what an employee buy-out involves

What is an employee buy-out?

An employee buy-out sees ownership of a business transferred to its employees. This can take many forms, from wholly employee-owned co-operative businesses like Suma Wholefoods through to Gripple which operates employee share schemes where employees own a minority stake in the business.

A solution to ‘succession problems’

Business succession is an issue for the UK economy. Businesses that are often going concerns with established products, markets and customers close each year, when a new buyer is not found, resulting in the loss of jobs, businesses and skills in our local communities.

Employee ownership is a viable succession option for business owners. Business owners can get a fair price for the business and who better to pass your business onto, than the people who know it best, the employees.

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    The last thing we wanted was for Aardman to be treated as a commodity. It's fundamental to us that those who create value benefit directly from the value that they create.
    – Aardman co-founders, Peter Lord and David Sproxton

    The benefits of employee buy-outs

    Passing ownership of the business into employee hands can:

    • Protect loyal staff from redundancy, and stop businesses from having to close.
    • Keep businesses in the local community, preventing unemployment and empty premises.
    • Create more engaged, fulfilled workers.
    • Improve productivity and innovation, and reduce absenteeism as commitment to the business increases.
    • Help spread wealth by maintaining wage levels and introducing share ownership.
    • Save the existing owner from negotiating with new or potentially adversarial buyers.
    • Allow the business to take long-term decisions about its future rather than focus solely on succession.

    Tax incentives

    In addition the Government has provided tax incentives to encourage the growth of employee ownership through two tax reliefs;

    1. A relief on Capital Gains Tax for owners when they sell a controlling shareholding in their Company to an employee ownership trust;
    2. An 'income tax exempt' bonus for employees of up to £3600 annually where an employee ownership trust owns a controlling stake (50% plus one share) in the employer Company.
    We're campaigning for more investment in worker and employee ownership
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