What is an Employee Ownership Trust (EOT)?

An Employee Ownership Trust is a purpose trust that holds some or all of a company’s shares for the benefit of its employees. Its flexible structure allows owners to design for multiple long-term priorities, including goals like preserving independence, protecting the company’s culture, and creating meaningful opportunities for employees to participate in the success and value they help create.

Key features of an EOT:

• Shared ownership: The business is held in a trust for the benefit of employees, not sold to individuals.
• No employee buy-in: Employees don’t purchase shares or take on personal debt to become owners.
• Shared profits: Profits can be distributed through profit sharing or other incentive plans, based on factors like tenure, seniority, performance, or more.
• Purpose-aligned governance: The trust operates with a set of guiding purposes, often focused on employee benefit, business continuity, independence, and stewardship.
• Ownership tied to employment: Shares are collective, not linked to individual tenure or retirement accounts.
• No buyback obligations: When an employee leaves, their share of economic benefit remains in the EOT. Ownership stays with the trust, avoiding the need for a costly repurchase process.
• Sustainable independence: The structure supports long-term independence and preserves the company’s mission.

Unlike an ESOP (Employee Stock Ownership Plan), which is regulated under ERISA by the Department of Labor, an EOT is governed by standard trust law. This gives it more flexibility in design and governance, with lower ongoing costs.