Frequently
asked questions
What sort of legal structures
are used by employees buying a business?
Most employee successions would incorporate as either a company
or an industrial and provident society. Larger employee successions
may use a Share Investment Plan (SIP) for tax efficiency. Legal
structures can be designed to meet the specific needs of the business
and its owners. (See technical issues – Legal structures)
How can employees raise the
money to buy a business?
The employees may have some money of their own to invest as shares,
especially if the succession is due to a redundancy situation. Loan
finance is available from commercial sources such as banks, and
from some specialist sources of finance which lend to this type
of enterprise. There may also be small amounts of grant finance
available, although this may depend on the geographical location
of the enterprise.
What is the personal liability
for employees?
By incorporating, the members of an employee succession gain limited
liability. This liability will either be an amount invested in or
guaranteed to the enterprise.
In the new business does everyone
have to make decisions about everything?
This depends on the size of the business. In small successions it
may be that all members are also directors, however in larger ones
the members will elect some of their number to be directors. Directors
are responsible for the direction of the enterprise but in all but
the smallest business they appoint people with the necessary skills
to management roles.
What happens to employees’
terms and conditions in a succession?
Employees’ terms and conditions are protected by the Transfer
of Undertakings (Protection of Employment) regulations, known as
TUPE, and cannot be varied without the employees’ consent.
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