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Business In the hands of employees In the current economic climate, there has been a glut of stories about company acquisitions. But, amid the traditional takeovers, a less trumpeted business model has been gaining attention employee ownership. By Jane Bainbridge F or years, the John Lewis Partnership (JLP) has been the go-to example whenever a company eschewing the traditional capitalist business model is cited. As the largest and best known company owned by its employees, it has long been heralded as proof that a large business can thrive without the scrutiny of the stock market, venture capitalists or founding directors. JLP has, for a long time, cut a lonely figure for industrial democracy, but that is starting to change. Over the past couple of years, some other large businesses have chosen to adopt this alternative model as they plan for their future, including Richer Sounds, Aardman Animations and Riverford Organics. The appeal of an alternative structure reached the market research sector at the start of the year, when BritainThinks announced it was moving to an employee trust model. So why the attraction for employee ownership (EO)? The Employee Ownership Association (EOA) points to specific benefits employees tend to be more entrepreneurial and committed when they are co-owners of a business. This can lead to a more profitable and sustainable company, as well as help to retain talent and boost recruitment. Another crucial factor made handing ownership to employees a more appealing proposition however, and that was the government establishing the Employee Ownership Trust (EOT). Graeme Nuttall is a tax and structuring partner at law firm FieldFisher, which advises on EO. He also led the independent review into EO in 2012 for the Department for Business, Innovation and Skills. Before the Nuttall Review, governments had only promoted employee shares as an add-on to the traditional business model, another form of financial incentive; but being able to hold employee shares in an EOT was the catalyst for a new business model. 52 The EOT contains various safeguards to ensure EO is genuine, and there are two nudges in the tax system to give that final incentive to look at the idea. The first is theres a complete exemption from capital gains tax for individuals selling a controlling interest in an EOT; the second is that once the EOT holds the controlling interest, it may pay bonuses to all employees up to 3,600 each tax year, free of income tax but not National Insurance contributions, says Nuttall. Structural decisions Setting up an EO structure can be simple and straightforward. The key is to make some careful, upfront design decisions that will stand you in good stead over the years to come, says Nuttall. The main decision is to choose between whether to have trust ownership or direct ownership of shares, or a mix of the two. The simplest route is trust ownership, where shares are held on behalf of employees but not directly by employees. This makes it easier for people joining and leaving the company. EO is particularly popular for businesses where the owners are looking for a succession plan. EO can work in start-up and turnaround situations, but all the growth since 2014 has been in succession situations, says Nuttall. Ben Shimshon is one of BritainThinks three founding partners, along with Viki Cooke and Deborah Mattinson. He says deciding to move to EO wasnt so much about succession planning as retaining the agencys culture. There are no plans for anyone to leave the business or retire, but its definitely the case that the strategic future is held across broader shoulders than just Deborah, Viki and I. We set it up in 2010 and its grown to almost 50