Lindsays extols the benefits of employee ownership in succession planning

Douglas Roberts

Roy Gill and his wife Lesley, of Gill Financial in Montrose, have become the first Scottish financial services firm to become fully employee-owned.

It’s a move which has been made with the support of corporate lawyer Douglas Roberts, of Lindsays, and employee ownership advisers Carole Leslie and Alistair Gibb of Ownership Associates.

The 10 employees have become owners of the business through a trust – in one of a growing number of employee ownership (EO) deals across Scotland.

It is a move that it is hoped will provide a new level of certainty for staff and customers while allowing Mr Gill, who has worked in financial services since 1991, to make plans for his own future.

Mr Roberts, a director in the corporate team at Lindsays who is an expert in EO, said: “The transfer at Gill Financial is an ideal example of how EO can be used for smooth and effective succession planning.

“Used at its best, EO allows businesses to look to the future, prepare for it properly and gives staff a stake in shaping it.

“Roy and Lesley have decided to reduce the time they spend with the business over a number of years and they have had the foresight to look at the best way of making that happen. They know their own employees were the best team to take the business on, so have worked with us to make that happen - helping map their own future and giving certainty to the staff, who may otherwise wonder what the future might be when Roy and Lesley decide to move on.

“I am delighted that Lindsays has advised on all legal aspects of this transition.”

Employee ownership is not a new concept, but its popularity has grown in recent years.

During 2020, Lindsays has been involved in five EO deals, building on 11 completed in the previous four years.

Explaining why EO was right for Gill Financial, Mr Gill said: “This move is about the brilliant team here and our clients first and foremost.

“An acquisition would have put so much at risk - and I hated the thought of that. For a start I didn’t want any of our staff’s futures put into uncertainty, or for the culture to change so significantly they felt forced to leave.

“Likewise, we know we deliver great value for our clients across pensions, investment and mortgage advice. The brand has been built up through hard work – and that’s a precious thing.”

Gill Financial looks after £100m-worth of assets for its clients.

Carole Leslie, founder of Ownership Associates, said: “Employee ownership is an increasingly attractive option for business owners and the Employee Ownership Trust allows Roy to exit knowing the business is in the capable hands of the employees.

“It was a pleasure, as always, working with Lindsays on this transaction. Having completed so many EOT deals, Douglas Roberts knows exactly how to approach this to ensure the best outcome for the seller, the company and the new employee owners.”

There are different levels of EO, from share options to selected members of staff to the employees or a trust owning 100 per cent of the company. Due to legislation introduced in 2014, most EO deals involved the process of more than 50 per cent of a company’s shares being transferred to the staff of that company. This is typically done by entrepreneur or family-owned businesses which have no obvious succession plan. They also attract strong tax benefits.

Mr Roberts explained: “When a company transitions to employee ownership then, subject to meeting certain requirements, the shareholders who sell pay no Capital Gains Tax. Due to Entrepreneurs’ Relief, most shareholders pay CGT at 10 per cent which means that someone selling a company for £1 million, for example, walks away with an additional £100,000. Recent changes to CGT make this even more attractive.

“Tax should not be the main consideration. Holding a stake in the place you work creates a different mindset among staff and can certainly spur innovation, performance and productivity, which benefits all involved. EO is growing in popularity and let’s hope that trend continues.”