Employee benefit trusts and corporate transactions
Produced in partnership with Karen Cooper of Cooper Cavendish
Employee benefit trusts and corporate transactions

The following Share Incentives guidance note Produced in partnership with Karen Cooper of Cooper Cavendish provides comprehensive and up to date legal information covering:

  • Employee benefit trusts and corporate transactions
  • Understanding the nature of the EBT’s shareholding
  • Shares held to satisfy employee awards
  • Unallocated shares and assets held by the Trustee
  • Taxation issues
  • Future of the EBT

Employee benefit trusts (EBTs) are a type of discretionary trust which are primarily established to enable companies to provide shares, cash or other benefits to their employees. They are commonly used to support employee share schemes and to encourage wider employee share ownership. For further more general information on EBTs, see Practice Note: What is an employee benefit trust?

This Practice Note looks at the impact that private company sale transactions can have on EBT arrangements involving shares and the practical challenges facing companies operating them.

Understanding the nature of the EBT’s shareholding

One of the first things to consider when looking at the impact of a potential corporate transaction on an EBT is the nature of the EBT’s shareholding (which will be held by the trustee or trustees of the EBT (the Trustee)). It will be necessary to establish the following:

  1. does the Trustee hold the legal and beneficial ownership of the shares? If they are holding the shares on behalf of any beneficiaries of the EBT, what is the nature of that relationship? Is there a nominee agreement in place? This will be particularly important from a timing perspective as the Trustee is likely to need to take instruction from the relevant beneficiaries as to how they want to proceed in light of the transaction

  2. has the Trustee agreed