An Employee Ownership Trust (EOT) is a unique and innovative ownership structure introduced in the United Kingdom through the Finance Act 2014. Other countries recognize similar forms of EOTs such as the Perpetual Purpose Trust (USA). It is designed to promote employee engagement, productivity, and long-term business sustainability by giving employees a significant stake and say in the company they work for.

1. Ownership Structure: In an EOT, a trust is created, and the company's shares are transferred to this trust. The trust holds the shares on behalf of the employees as beneficial owners. The employees become indirect owners of the company, and their interests are represented by the trustees of the EOT.

2. Employee Participation: EOTs enable employees to have a real sense of ownership and involvement in the company's decision-making process. This involvement is often through an Employee Council or Employee Forum, where employees can provide input and influence company strategies and policies.

A company can transition to an Employee Ownership Trust by restructuring its ownership and handing its shares into the trust. In the case that compensation is necessary for the shares, this can be funded by the company itself or through external financing.

Employee Ownership Trusts are particularly attractive for:

• Succession Planning: Business owners looking for a smooth and inclusive succession plan can opt for an EOT. It provides an exit strategy for owners who want to pass on their business to employees while ensuring its continued success.

• Employee Engagement: Companies with a strong focus on employee engagement and a desire to align the interests of employees and shareholders often find EOTs appealing. The model fosters a sense of ownership and encourages employees to contribute to the company's success.

• Long-Term Stability: EOTs can benefit businesses seeking stability and continuity. The long-term commitment of employees to the company's success can help create a resilient and sustainable business.

Once a company becomes an Employee Ownership Trust, the shares are held in the trust for the benefit of the employees. The assets are "locked" in the sense that they cannot be sold to external buyers, ensuring that the company remains employee-owned.

As for voting rights, the trustees of the EOT usually act out the voting rights on the shares in the trust. However, some EOT structures might grant voting rights directly to employees, allowing them to participate in significant decisions that impact the company.

Can an EOT be classified as a steward-owned company? It depends! A trust structure is irreversible so once it is created, the assets cannot be taken out any more. In addition, the voting shares are held by employees. However, it must be ensured that this asset lock includes 100% of the companies’ shares and that the majority of voting rights is put into the trust, not merely a fraction.