Employees are expected to become the owners of 30 more Scottish companies this year – double the number of deals completed in 2020.
The forecast has been made as Employee Ownership Day today highlights the growing contribution of staff-owned companies to the national economy.
Douglas Roberts, a director in the corporate team at legal firm Lindsays, is working with a number of businesses embarking on the change, having advised more than 15 employee owned companies in the past four years.
There are currently 103 employee-owned companies in Scotland, with the Scottish Government targeting 500 by 2030.
“The Scottish Government target is ambitious, but the increasing number of employee owned companies will have a huge benefit to the economy because it will keep jobs, wealth and talent in this country,” said Roberts.
“Commonly when Scottish companies are sold then the main administrative roles – often the highest paid positions in the company – are moved out of Scotland and eventually the Scottish operations may be shut; but employee-owned companies are far more likely to remain.”
A total of 15 firms made the switch to employee ownership in 2020, with Co-operative Development Scotland – the Scottish Enterprise division supporting the employee owned-drive – having already said it expects 2021 to be the most successful year yet for transitions.
Carole Leslie, founder of Ownership Associates, which has worked with Roberts on a series of deals, said: “Employee ownership has the ability to bring real prosperity to businesses, and not just through staff satisfaction, but increased productivity and revenue.
“As more Scottish business owners consider their exit strategy, an increasing number are finding that a sale to an Employee Ownership Trust delivers what they are looking for.
“They can achieve a fair value for the business, remain with the company as long as they want to, secure in the knowledge their business will continue in the hands of those who know it best, the employees.”
Montrose-based Gill Financial is among the firms which has become employee-owned in the past 12 months – the first financial services business in Scotland to do so.
Its 10 employees became owners through an Employee Ownership Trust, with Lindsays and Ownership Associates advising on the change.
Roy Gill and his wife Lesley decided to make the move to provide a new level of certainty for staff and customers while allowing Mr Gill, who has worked in financial services since 1991, to make plans for his own future.
Mr Gill said: “An acquisition would have put so much at risk – and I hated the thought of that – I didn’t want any of our staff’s futures put into uncertainty, or for the culture to change so significantly they felt forced to leave.”
There are different levels of employee ownership, from share options to selected members of staff, to the employees or a trust owning 100% of the company.
Due to legislation introduced in 2014, most deals involved the process of more than 50% of a company’s shares being transferred to the staff of that company. This is typically done by entrepreneurs or family-owned businesses as part of their succession plans.
Roberts explained: “When a company transitions to employee ownership then, subject to meeting certain requirements, the shareholders who sell pay no Capital Gains Tax (CGT).
“Due to Business Assets Disposal Relief – formerly Entrepreneurs’ Relief – most shareholders pay CGT at 10% on the first £1m of a sale which means that someone selling a company for £1m, for example, walks away with an additional £100,000.”
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