Executive Summary

The directors manage the company. The trustees hold and vote the controlling shareholding, protect eligible employees as a class, monitor the company and exercise only those approval or intervention rights given by law and the governing documents. These terms also set the Trustee Board’s meeting, decision-making and reporting arrangements.

1. Purpose and Legal Framework

The Trustee Board holds the company’s shares for eligible employees collectively and protects the long-term success, sustainability and independence of the employee-owned business.

The trustees must act under the Trust Deed, applicable trust law, the Articles of Association, any Shareholders’ Agreement and their duties to beneficiaries. They act for beneficiaries as a class, not for any individual employee, director, founder, seller or other stakeholder.

2. Trustee Authority and Responsibilities

The table below summarises the division of responsibility. Trustee approval, veto or information rights apply only where provided by law, the rights attaching to the trust’s shares or the governing documents.

3. Division of Responsibilities and Legal Rights

Area Directors’ role Trustees’ legal right / role Source / limitation
Day-to-day management Manage the company and make operational decisions. No general right to manage or instruct employees. Company law places management with the directors, subject to the Articles.
Information and reporting Provide agreed financial, strategic and risk information. Request information reasonably required to perform trustee duties and exercise shareholder rights. The precise access right should be stated in the governing documents; confidentiality applies.
Strategy, budgets and forecasts Prepare, approve and deliver. Review, challenge and monitor; approve only where expressly reserved. Trust Deed, Articles, Shareholders’ Agreement and Reserved Matters Schedule.
Performance and risk Manage performance, controls and corrective action. Monitor, challenge assumptions and require an explanation or action plan. Trustee oversight does not transfer executive responsibility.
Executive remuneration Propose and administer remuneration arrangements. Review or approve material arrangements where reserved; challenge terms inconsistent with long-term beneficiary interests. Only an approval right where granted by the governing documents.
Appointment and removal of directors Support succession and make recommendations. Vote the trust’s shares and exercise any express appointment or removal right. Companies Act 2006, Articles and any Shareholders’ Agreement; statutory procedure and director rights must be followed.
Shareholder voting Put shareholder matters forward where required. Attend, speak and vote at shareholder meetings; give written resolutions or consents where lawful. Rights attach to the shares and are subject to the Articles, class rights and company law.
Reserved matters Seek approval before committing the company. Approve, reject or impose lawful conditions on matters expressly reserved. No veto exists unless created by the governing documents or share rights.
Constitutional changes and share rights Recommend changes and implement approved actions. Vote on amendments, new share issues, variations of rights and other shareholder decisions. Subject to statutory thresholds, class rights and the governing documents.
Major transactions and borrowing Evaluate, negotiate and recommend. Approve only if the transaction falls within an express reserved matter or otherwise requires shareholder consent. Thresholds and scope should be defined in the Reserved Matters Schedule.
Employee beneficiaries Engage employees and support the ownership culture. Act for eligible beneficiaries as a class, treat them fairly and protect the trust’s long-term purpose. Trust Deed, trust law and applicable EOT tax conditions; trustees do not act for individual employees.
Conflicts and related-party matters Declare and manage director conflicts. Identify trustee conflicts, obtain advice and approve or abstain only as permitted. Trust Deed, Articles, trust law and any conflict procedure.
EOT qualifying conditions Provide data and avoid actions that could prejudice qualification. Monitor the trading, all-employee benefit, controlling-interest, limited-participation, trustee-residence, trustee-independence and consideration requirements; obtain advice before a potentially disqualifying action. Taxation of Chargeable Gains Act 1992 and current HMRC guidance; tax advice is required because conditions and consequences may change.
Professional advice and escalation Respond to concerns and provide records. Take independent legal, tax, valuation or financial advice where reasonably required; escalate through shareholder powers. Subject to the Trust Deed, proper purpose, proportionality and any agreed cost protocol.

4. Governance and Administration

  • Composition: The number, eligibility, appointment, term, removal and replacement of trustees shall follow the Trust Deed and any constitutional documents. The Board shall appoint a Chair and, where required, a secretary.
  • Meetings: The Board shall meet at least quarterly and additionally when necessary. Reasonable notice, an agenda and supporting papers shall normally be circulated in advance.
  • Quorum and voting: Quorum and voting shall follow the Trust Deed. Unless it provides otherwise, decisions are by majority of those entitled to vote; the Chair has no casting vote. Written decisions may be used where permitted.
  • Conflicts: Interests must be declared promptly and recorded. A conflicted trustee shall not receive restricted papers, vote or count in the quorum unless the governing documents and law permit it.
  • Records and reporting: Minutes shall record decisions, reasons, challenges, conflicts and actions. The company shall provide a regular reporting pack covering performance, cash, debt, forecasts, risk, remuneration, succession, employee engagement and EOT compliance.
  • Advice, delegation and expenses: The Board may obtain proportionate independent advice and delegate work where permitted, but remains responsible for decisions. Properly incurred trustee expenses may be reimbursed in accordance with the Trust Deed and agreed policy.
  • Review: The Board shall review these terms, its effectiveness, training needs and the Reserved Matters Schedule annually and after any material legal, tax, ownership or constitutional change.

5. Trustee Conduct

Trustees shall:

  • Act honestly and in good faith.
  • Exercise independent judgement.
  • Avoid conflicts of interest.
  • Maintain confidentiality.
  • Act fairly between beneficiaries.
  • Exercise reasonable skill and care.
  • Undertake appropriate training and continuing professional development.
  • Act in accordance with the Trust Deed and in the interests of eligible beneficiaries as a class, having regard to the long-term sustainability of the trust and its controlling shareholding.

Legal status: These terms guide the Trustee Board but do not override the Trust Deed, Articles, any Shareholders’ Agreement or applicable law. If there is a conflict, those documents and the law prevail.