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GLOSSARY

Employee benefit trust (EBT) definition

Published by a LexisNexis Share Incentives expert

What does Employee benefit trust (EBT) mean?

A trust established to hold assets to provide benefits for the employees of a company or group of companies. Such assets may include shares in the relevant company, with implications for the rules on mandatory offers under Rule 9 (see Note 5 on Rule 9.1).

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Funding an employee benefit trust

Funding an employee benefit trust This Practice Note covers the following issues in relation to the funding of an employee benefit trust (EBT): • practical aspects of funding an EBT • financial assistance—the background • financial assistance—the current position • relevance of financial assistance to EBTs • financial assistance—exemptions • the employees’ shares scheme exemption • consequences of non-compliance of the financial assistance provisions • tax implications for close companies which fund EBTs, and • corporation tax relief in respect of EBT funding Practical aspects of funding an EBT When an EBT is first set up, it needs to be provided with initial financing, as a trust cannot exist without initial trust assets. It is common for a nominal amount, for example £100, to be settled on the trustee in order to establish the EBT (for further details, see Practice Note: Setting up an EBT). However, after the EBT has established, other funding can be provided. This may be by way of: • voluntary contribution • loan...

Why do companies use share schemes?

Why do companies use share schemes? Why not just reward staff with cash? It is often a simpler, less burdensome way to reward and incentivise employees. This Practice Note analyses the advantages and disadvantages of shares schemes as a general concept. For further details on the advantages and disadvantages of each individual type of scheme, see Practice Note: The advantages and disadvantages of each share incentive arrangement. This Practice Note details: • why do companies implement share schemes? • what are the types of share schemes? • the advantages of share schemes (from a company and employee perspective) • the disadvantages of share schemes (from a company and employee perspective), and • use of share schemes Why do companies implement share schemes for their employees? There are numerous reasons why companies choose to implement employee share schemes and many of these depend on the size of the company and its specific objectives. Some common reasons for companies utilising share schemes include, but are not limited to: • recruiting,...

Discover our 8 Practice Notes on Employee benefit trust (EBT)

Notification of termination of the EBT–letter to trustees

Notification of termination of the EBT–letter to trustees [insert full name of Trustee] as trustee of the [insert full name of the employee benefit trust] [insert full address of trustees] [insert date of letter] Dear Trustee(s) [name of the employee benefit trust] (EBT) We are writing to you in your capacity as trustee of the EBT (Trustee). We refer to the trust deed establishing the EBT dated [insert date of trust deed] executed by you as Trustee and [insert name of settlor of EBT] (the Company and the Trust Deed). [There are no assets and liabilities in the EBT We understand that the EBT no longer has any assets or liabilities and therefore has ceased to be constituted as a trust. However, we need to recognise formally that the EBT has been terminated and notify HMRC accordingly. We therefore propose that the enclosed deed of termination be executed. This deed of termination formally records the exercise of your power under Clause [insert relevant clause] of...

Company board minutes approving the termination of an EBT

Company board minutes approving the termination of an EBT Minutes of a Meeting of the Board of Directors of the Company held at [insert place of meeting] at [insert time of meeting] on [insert date of meeting] Name Position Present: In attendance: Apologies for absence received from: 1 Notice and quorum 1.1 The Chair reported that due notice of the meeting had been given, that a quorum of directors was present and that the meeting was therefore duly convened. 2 Business of the meeting 2.1 The Chair reported that the meeting had been convened: 2.1.1 to consider and, if thought fit, recommend the termination of the discretionary employee benefit trust called the [insert name of Employee Benefit Trust] (the EBT) to the trustee of the EBT (Trustee)[; and OR .] 2.1.2 [to approve the making of a voluntary contribution of £[insert amount] to the Trustee to enable it to meet its liabilities[;...

Dive into our 8 Precedents related to Employee benefit trust (EBT)