Home »
An employee benefit trust (EBT) is a type of discretionary trust established for the benefit of employees and former employees of a company (or its group). It can also be used to benefit relatives and dependants of employees.
A company will establish the EBT via a trust deed and appoint a trustee who is independent of the company. The trustee must act in the best interests of the beneficiaries of the trust.
EBTs are often, but not always, used in connection with employee share schemes. This is because they can create a vehicle to acquire and hold shares to satisfy share awards under an employee share scheme. They also create a useful internal market to enable employee shareholders to sell their shares in private companies and ultimately receive value for those shares.
EBTs can also be used to enable the company to become wholly or partially owned by its employees. This is done via a special form of EBT, an employee ownership trust. Such a trust gives business owners the opportunity to sell their shares to an employee-owned trust.
Further, EBTs can be used alongside other employee incentive arrangements, such as bonus payments.
The main purpose is therefore to incentivise and reward employees which in turn can encourage employee engagement and loyalty.
EBTs will often need to be tailored to meet the needs of a business and its structure. Some key legal and practical considerations include:
The main document required to establish an EBT is a trust deed. The trust deed will outline the powers of the trustee along with defining the scope of the class of beneficiaries.
There will also be ancillary documents, such as board minutes and any shareholders resolutions, to ensure that the company has the relevant authorisations to establish the EBT.
If the EBT will be funded by a loan from the settlor company or a group company then a loan agreement will be required. Even if the EBT is to be funded by gifts, it is good practice to have in place a simple contribution agreement which sets out the terms on which the contribution is made.
Other documents may also be required at the outset or shortly after establishment, depending on what the EBT is being set up for. For instance, rules of a share plan scheme and template share option or subscription agreement. The company’s articles of association will also likely to need to be amended or new articles adopted.
If you need any advice on employee benefit trusts, please contact a member of our corporate and commercial law team in confidence here or on 02920 829 100 for a free initial call to see how they can help.
To speak to one of our experts today, please contact us on 02920 829 100 or by using our Contact Us form for a free initial chat to see how we can help.
I have worked with Darwin Gray for a number of years and the level of service, professionalism and timely response is second to none. I would highly recommend Darwin Gray to any business.”
Darwin Gray have provided us with a first-class service for many years now. They really take the time to understand our business and develop relationships which results in advice and support that is contextualised and effective.”
We have worked with Darwin Gray for several years and have always found their services and advice to be first class.”
An extremely professional and sincere company who make time for your queries and understand the need to break down certain facts and information to ensure everything is understood perfectly. I would highly recommend the company to anyone looking for any type of legal advice”
PSS has worked with Darwin Gray for many years. We have always received an excellent service. Prompt and professional advice and support.”
We have used several departments within DG recently and we have been very pleased with an effective, efficient and down to earth service. Very happy thus far and I expect that we will continue to use DG.”
Darwin Gray offer us truly superb services. Very professional, quick and services available bilingually which is very important to us, highly recommend.”
My “go to” in urgent and time sensitive cases for direction, support and advice. The team are quick to respond to calls or emails for advice and support on all matters. Always explain complex matters in a way a lay person can easily understand.”
Darwin Gray have acted for myself and my company over a number of years and at all times we have been treated with a professional manner yet maintain a common-sense approach at all levels. We couldn’t recommend them more highly.”
We have been clients of Darwin Gray for many years; they’ve always dealt with all of our legal matters with such professionalism. They work around us, even during awkward hours, and we feel confident we can always rely on them.”
Darwin Gray has been acting for Siltbuster for more than ten years. We would have no hesitation in recommending Darwin Gray to other organisations small or large.”
From the very first conversation, I had no doubt that Darwin Gray should be the firm to receive our instructions on this matter. I would have no hesitation in recommending Darwin Gray.”
We regularly instruct Darwin Gray. Their service in dealing with our transactional matters and disputes is always professional, prompt and efficient.”
Darwin Gray guided me through a long and extended process that would have been much more difficult had it not been for their patience and constant support.”
Excellent and efficient service. Great result achieved, highly professional and transparent on pricing. Would recommend.”
Superb legal service provided. Exceeded expectations. They went above and beyond in order to provide the best service possible.”
Very professional and understanding. They were a calming influence in a very troubling situation and they brought it to a very successful conclusion”
We have used Darwin Gray and have been seriously impressed. The personal approach is what Darwin Gray are excelling on and is the reason why we will continue to work with them in the future.”
