Use of EBT and Nominee Facilities for Portfolio Company Management of Share Plans
As part of best practice in the structuring and administration of management incentive arrangements within portfolio companies, the adoption of an Employee Benefit Trust (EBT) and nominee facility delivers significant benefits. These structures provide commercial, governance, tax, confidentiality, and operational advantages that align closely with the private equity ownership model and investment lifecycle.
Key Benefits of EBT & Nominee Arrangements
Confidentiality of Employee Shareholders - Employees' interests are held beneficially through the nominee, meaning individuals and their holdings are not directly listed on the public share register. Sensitive information relating to management participation is protected, preserving commercial confidentiality. Confidentiality is maintained even during corporate events, reducing the risk of commercially sensitive information becoming widely disclosed.
Exit Readiness & Transaction Efficiency - Vastly simplifies corporate events and exits by allowing the nominee to be the sole party in respect of employee holdings to all transaction documentation. Avoids the need for multiple shareholder consents across the participant population. Share transfers are processed via simple beneficial ownership updates, rather than physical share transfers.
Cap Table Simplification - Nominee structure consolidates participant holdings, significantly reducing the number of registered shareholders. Simplifies company secretarial obligations and statutory filings.
Administrative Efficiency - Simplifies leaver processing, share reallocations, and ongoing management of awards due to legal title of shares not changing. Reduces the administrative burden for portfolio company secretarial teams.
Tax Efficiency & Regulatory Comfort - Jersey-based professional trustees can benefit from CGT sheltering on unencumbered shares in the trust. UK government reviews have reinforced the role of offshore EBTs as an appropriate and effective mechanism.
Portfolio-Wide Consistency - Adoption of a standardised approach across portfolio companies creates consistency, scalability, and ease of management for the PE House.
Tried, Tested and Market Standard - These structures are well-established and widely adopted across PE-backed private companies.
Tackling common challenges
Employee share ownership can bring real value, but it also introduces some practical and administrative challenges. Using an Employee Benefit Trust (EBT) with a Nominee arrangement can address many of these effectively:
Employee shareholdings publicly disclosed - Beneficial ownership held confidentially.
Complex exits involving multiple participants - Nominee executes all documentation on behalf of all employee shareholders.
Cap table clutter with multiple employee shareholders - Single nominee entry for all employee shareholders simplifies register.
High administrative burden on share plan activity - Centralised, predictable processes.
Tax leakage - Jersey trustee can deliver a tax-efficient solution (CGT sheltering on unallocated shares).
Variability across portfolio companies - Standardised structure portfolio-wide.
Conclusion
The adoption of EBT and nominee arrangements reflects market best practice for PE-backed companies. These structures deliver operational simplicity, preserve confidentiality, mitigate governance and fiduciary risks, ensure transaction readiness, and enhance employee experience. Fiduchi has extensive experience in establishing and administering such arrangements tailored specifically for private equity portfolio companies.
For more information, please contact Tom Hicks or Pearl Rabet or following this link to read more about Fiduchi and all services relating to Employee Incentives.