March 2024
Employee ownership trusts (EOTs) are an increasingly common way for sellers of closely held companies to transition out of ownership. In an EOT, the company sets up a special-purpose trust to own shares that the company (not employees) buys from the seller using their future profits to repay a note, often from the seller or a combination of the seller and a bank. The trust is designed to hold the shares in perpetuity. The employees are generally not owners but have a claim on company profits through dividends or conventional profit shares. EOTs are often chosen instead of an employee stock ownership plan (ESOP), which offers tax benefits but is much more costly and complex than an EOT. This book helps decision-makers decide whether an EOT is the right approach for their company. Chapter 1 introduces EOTs and compares them with ESOPs. Chapter 2 elaborates on how EOTs work, and chapter 3 delves into structuring them. Chapter 4 explores EOT financing, while chapter 5 discusses EOT governance. Chapter 6 discusses how EOTs can share equity rights with employees. Finally, chapter 7 provides EOT company case studies.
Authors: Anne-Claire Broughton, Courtney Kemp, Alison Lingane, Christopher Michael, Corey Rosen, Stacey Smith, and Steve Virgil
Purchase the full publication here.
Employee ownership trusts (EOTs) are an increasingly common way for sellers of closely held companies to transition out of ownership. In an EOT, the company sets up a special-purpose trust to own shares that the company (not employees) buys from the seller using their future profits to repay a note,[...]
