A Year On From Transition | Castlet Holdings Ltd Reflect on Employee Ownership

Twelve months on from their transition to an Employee Ownership Trust (EOT), we caught up with Castlet Managing Director Tim Eagles to reflect on the journey so far.

Advised by Sills & Betteridge Corporate Partner Euan McLaughlin, the company’s route to employee ownership wasn’t the typical succession story. Instead, the EOT provided a solution to a complex shareholder structure while creating a clearer, more stable future for the business.

What originally inspired you to transition the company to employee ownership – and why was 12 months ago the right time for Castlet? 

Castlet wasn’t the classic EOT transition – that of a long-term owner selling to the staff. Castlet was in a somewhat more difficult situation where an owner had previously sold shares to employees, but there wasn’t a sensible method for valuing the business and for selling shares thereafter. This issue was further complicated by an unhelpful set of company Articles. In short, a perfect storm of situations broke out amongst shareholders. I wasn’t in the business at the time, but I understand it was Euan who suggested that an EOT structure could resolve our issues. To put the situation in context, when I joined the business I did a review of company spend over the preceding 12 months, and Sills were our third largest supplier by spend. Much as we appreciate the support, we are not a business that should be requiring this volume of legal resource.

Are early impressions positive and expectations being met?

Given what had gone before, the EOT was positive and allowed all of us to refocus on running the business. It hasn’t changed the day to day running of the business as we weren’t transitioning from owner/manager to new management, but I do think it has made a difference in the background. We held a company day to celebrate the transition which also coincided with rebranding the business…..so it felt quite a fresh start.

What has the impact of the move to EOT been – both on the morale and commitment of employees, but also on the financial and business performance of Castlet?

A big change has been that management has shared the financial performance of the business much more – it is ‘their’ business after all. Not just the P&L, but cashflow too and I’ve talked more about the costs of certain things – cost savings and project costs for instance.

We are ‘on track’ to repay the total deferred income to ex-shareholders in about 3.5 years, which is great.

But perhaps the biggest impact has been the ability to pay tax-free bonuses to all staff of up to £3,600 per annum. We announced a £1,000 per head payment last July and one of the moments of my year was watching the reaction of my youngest apprentice – his smile lit up the room. As you mention, we are now at our first-year anniversary, and we have just announced a further bonus to take the total bonus paid for this tax year to just under £3,400 per head. That represents a serious bonus for all staff.

What advice would you give to other business owners considering an EOT – other than to speak to Euan?!

It depends on their own circumstances but go and investigate it – it is not right for every business, but for a sizeable minority it will be a good fit. There have been no downsides for Castlet, only positives.

If you wish to explore whether an EOT could work for your business, get in touch with Corporate Partner Euan McLaughlin on 01522 542211 or emclaughlin@sillslegal.co.uk