Over the last few years, I have had conversations with literally hundreds of business owners about employee ownership and succession planning. A good number have become happy clients.
When I follow up with owners yet to sign up as clients, typically months later, I am sometimes told that they have engaged solicitors to advise them.
Now, don’t get me wrong, I’ve nothing against solicitors! Quite the opposite, the legals are an essential part of the process – but they come at the end of the process, and not at the beginning.
It is vital to understand that transition and transaction are not the same – and transition comes first. You don’t actually need lawyers until you get to the transaction.
Transition involves getting your whole business ready to operate in a new ownership model – including securing employee engagement, helping people to think like owners, clarifying decision-making and encouraging staff participation. Without this, how can you know for sure the business will continue to perform once you step back?
Solicitors are wonderful people – but not many of them have run businesses. Make sure you get help on transition from people who have been there and done it.
The questions that you answer at the beginning of transition will save you money when you do come to appoint solicitors towards the end.
For instance, take the role that the Trustees will play in the business once the Trust is in place. Some of the questions that will need to be answered include:
- How many trustees there will be;
- What mix of employees directors and independents;
- How will they be elected/selected/appointed;
- What their precise remit will be;
- How often they will meet the Board/Exec team;
- How will they make themselves available to all employees;
- What will be their approach to distributing dividend in the name of the EOT;
- What instructions will they be given in the Letter of Wishes shared at point of set up.
All of these are questions that you will be asked – and charged for your thinking time – by a lawyer. Don’t pay legal rates for non-legal work!
By focusing on getting the business in the right shape for employee ownership long before you engage solicitors, you can make sure you have the answers to their questions ready, and ensure you use their expertise in the right way, and at the right cost.