The Shetland blog: Is employee ownership the future of your business?

Every month, lawyers from Harper Macleod - the biggest Scottish law firm with an office in Shetland - share their insights on issues which can affect local businesses and individuals.

Chris Kerr is a partner at Harper Macleod and a specialist in advising owner-managed and family owned businesses.

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I'm always wary of articles that begin 'a recent study has shown …' but this time I'm going to make an exception.

First, here was the result – more than half of people trust employee-owned (EO) businesses more than non-EO businesses. A similar number believe it would be better for the economy if more business were owned by their employees. These results come at a time when trust in businesses and their leaders are reported to be at an all-time low.

The study in question was commissioned by the Employee Ownership Association, along with Co-operative Development Scotland (CDS).

I just happen to have spoken at a recent event on this subject, hosted by Highlands and Islands Enterprise and CDS, and having specialised in advising both family owned and owner managed businesses for many years, it's an area I have a special interest in.

The number of businesses transitioning from "traditional" ownership to employee ownership is also something that's happening more and more, and not just the subject of speculative reports. Indeed, it was one of the big themes at Shetland Business Week earlier this year and since then my team has been working with a number of businesses locally and throughout the Highlands to examine this option for business succession.

Succession planning is always high on the agenda of Shetland businesses, particularly owner-managed or family businesses. If you are going to exit the business, or simply retire, where is the money going to come from to let you extract the value you have in it?

There are many good reasons to consider employee ownership, both for existing owners and their employees.

The Government views it as a good thing and there can be funding available to investigate feasibility, while there are also tax incentives to becoming employee owned.

EO businesses are more likely to remain in the local area and create long-term jobs, while having an interest in the business your work for is said to create more job satisfaction, greater productivity and fewer absences.

With owners able to realise a value on exit, have control of that exit and protect their ‘legacy’ at the same time, it is understandable that the number of employee owned businesses has risen rapidly in recent years.

Professional advisers, including lawyers, are also now more alive to and less sceptical about employee ownership as a possible solution (or part of a solution) to succession planning for a business and its owners. This has helped make it much more acceptable for the model to be brought up when having these types of discussions.

If you think employee ownership is something that might work for your business, please feel free to get in touch and discuss it with a member of our team.

 

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This article originally appeared in the Shetland Times