Latest news with #NicholasHowie
The Herald Scotland
12 hours ago
- Business
- The Herald Scotland
'For us, this is about building a legacy for our team'
Following a period of rapid growth over recent years, there are now nearly 300 employee-owned firms in Scotland. These concerns employ more than 7,500 people and turn over in excess of £1.5 billion collectively. And the number of Scottish firms where staff hold majority stakes, chiefly through employee ownership trusts (EOTs), is expected to continue to increase, despite recent changes to the tax regime, as the Scottish Government targets having 500 employee-owned businesses operating in the country to 500 by 2030. Nicholas Howie, partner in the corporate law team at Lindsays, which has advised on 25 employee ownership deals in recent years, said: 'An exit strategy can be one of the biggest issues facing owners of SMEs (small and medium-sized enterprises) in Scotland. Employee ownership is an increasingly effective - and empowering - way of managing that. It's transformational for many businesses. 'It allows sellers - often founders or families who have run businesses for generations - to continue to play a role in their future, while putting the legal and financial frameworks in place which create a long-term legacy for their employees. 'Owners who sell their shares to an EOT gain an exemption on capital gains tax. But, on top of that, EOTs are really starting to demonstrate their economic worth. Read more: 'The feedback that we've had is that businesses which make the change become more productive and profitable because the whole staff team has a stake in its success, with the ability to award employees annually with bonuses of up to £3,600 per year per employee.' Among the newest to make the change in Scotland is Wetrooms International Group, the Rutherglen-based bathrooms supplies business, which cited ambitious growth plans among the reasons for transferring the majority of its equity to its 80 employees. Founders Brian and Bill Crombie have retained a 26% shareholding following the transition to an EOT. Brian Crombie said: 'For us, this is about building a legacy for our team, recognising the loyalty of our staff. Becoming an EOT was the logical step for us to take. It makes sense for everyone. 'I'm 73 and Bill is 71. We've got ambitious plans for the business while naturally also considering what work looks like for us longer term. We've had approaches, but didn't like the idea of a trade sale, putting the business in the hands of someone who might not understand our unique ethos. Our team deserves better.' Bill Crombie added: 'The business is in a real period of growth with huge potential to expand significantly over the next five years.' Employee ownership is continuing to grow in popularity despite recent changes to the capital gains tax regime for EOTs in the Autumn Budget. The changes will aim, among other things, to 'restrict former owners or persons connected with former owners from retaining control of companies post-sale to an employee ownership trust by virtue of control (direct or indirect) of the employee ownership trust'. They also aim to 'require that the trustees must take reasonable steps to ensure that the consideration paid to acquire the company shares does not exceed market value' and will extend the capital gains tax clawback period from one complete tax year following the tax year of the sale to four complete tax years. Specialist advisor Carole Leslie, director of Ownership Associates, who has helped more than 150 firms make the transition in the last year, said: 'The interest in the EOT structure is continuing to accelerate at pace across all business sectors. As awareness grows, more companies are seeking out a succession option that allows the owners to realise their value in the company tax effectively and allows them to control their own exit from the company. 'It's great news for employees. They can be as reassured as possible that their employment will continue for as long as the company continues to be successful, whereas any other succession option would likely lead to disruption and possible relocation or downsizing.' The benefits that can be achieved from staff having a greater stake and say in how they work are being highlighted today, as Employee Ownership Day takes place.
Scotsman
19-05-2025
- Business
- Scotsman
Don't let the success of your business be derailed by a fall-out
A look at the complicated world of shareholder disputes Sign up to our Scotsman Money newsletter, covering all you need to know to help manage your money. Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... Amid the excitement of setting up a new business venture – or when everything's going well – one of the most unthinkable questions can often be: 'What happens if we fall out?'. Unfortunately, circumstances can – and do – change. People will not always agree. That is especially true when wider economic tensions place a strain on the finances of the business, or when personal or ideological views begin to differ and priorities shift. Advertisement Hide Ad Advertisement Hide Ad The reality is that too few business partners are having that, 'What if?' conversation at the time it matters most: when they are getting along. Particularly in family businesses and SMEs, where failing to do so simply adds to stress, uncertainty, and financial risk if things do change or a parting of the ways becomes necessary. A shareholders' agreement can provide piece of mind, says Nicholas Howie These are facts borne out in the rising number of shareholder disputes recorded across the United Kingdom in recent years - some of which can rumble on for years. Scottish Government statistics show 120,000 businesses were 'launched' between 2000 and 2024. It is likely that most began trading without a shareholders' agreement in place. That is a critical strategic mistake. Even if you think you are doing the right thing by waiting for a day when time and resources are not so tight, it can be a false economy. Being forced to resolve a dispute is always more costly than taking proactive steps to prevent one. Advertisement Hide Ad Advertisement Hide Ad Failing to have the right mechanisms in place to address potentially contentious issues in advance can stall the growth of the business, or even jeopardise its future. Disagreements over whether to invest for the future or pay dividends, the differing extent to which shareholders are involved in or contribute to the business, and who exercises control over decision-making and succession planning can all lead to situations where people no longer wish to carry on working together. It can be difficult, particularly when working with friends or family, where any fall-out ultimately feels more personal. Yet just like a Will or Power of Attorney in your personal life, putting in place contingency plans and procedures will help protect the future of the business and those who could be affected by any decisions made, including the loved ones left behind in the event of a shareholder's death. Advertisement Hide Ad Advertisement Hide Ad A shareholders' agreement can, among other things, include provisions relating to the transfer of shares (including compulsory transfers of shares on the event of a death or bankruptcy of a shareholder), the distribution of profits, the management and control of the company (including the frequency and format of shareholder meetings) and dispute resolution mechanisms. The precise contents will depend on the specific circumstances of those involved. Any suggestion that a shareholders' agreement is a sign of anticipating failure is misguided. Indeed, I would argue the opposite is true. They are about safeguarding the wellbeing of businesses and their shareholders by preparing for as many eventualities as possible, especially at a time when the demands on SMEs have never been greater amid the rising cost of doing business. Advertisement Hide Ad Advertisement Hide Ad We want businesses to be in a position where they can seize growth opportunities and success, not to have their prosperity threatened or delayed because of disputes among the owners. Greater recognition of the part that shareholders' agreements can play would help many more achieve their potential.
