Bank accounts for your EOT

Unfortunately this can be a real pain point for companies becoming Employee Owned.

Typically the trading company barely changes. It still employs the same people, to sell the same things, to the same customers.

So why are banks awkward about it?

Before we get into the issues trading companies can face after becoming Employee Owned, let’s first briefly talk about the EOT trustee company.

EOT trustee company bank account

Put simply, it won’t need one. The EOT trustee company should never receive any money.

The only cost it will always incur is the annual confirmation statement fee to Companies House. It’s fine for the trading company to pay this cost on the EOT company’s behalf.

Possibly your accountant may charge fees for filing of dormant accounts and/or confirmation statement for the EOT trustee company. If so, again, the trading company can pay. Realistically any costs like this should be minimal.

Trading company bank account

We can’t imagine any company in this day and age operates without a bank account (if you manage to, impressive!)

Hence you’ll have had a bank account long before becoming Employee Owned. Surely you can just stick with it?

You’d certainly like to think so, yes. As mentioned at the start, very little has changed with the actual trading company itself. It simply has a new owner.

So what’s the problem?

The problem stems from banks having to understand their clients. Not just what they do (which hasn’t changed), but who controls it. Anti money laundering “know your client” regulations.

Prior to the EOT sale, the company will have been owned by a handful of individuals (possibly just one). They were the “Persons of Significant Control”, or PSCs.

Now the trading company will have a corporate PSC, being the newly created EOT trustee company.

Some banks refuse companies with corporate PSCs

For some banks (particularly the newer challenger banks), this is too complicated for them to want to be involved.

They want to cater to the masses. Employee Ownership Trusts are still fairly niche. At time of writing there are fewer then 2,000 of them in the UK. Whereas stats suggest there’s currently 2.1million active companies.

It’s understandable they’re not too fussed about acting for 2,000 of 2,100,000 (ie 0.1% of the business market), regardless of how frustrating it may be for EOTs!

Ok, but many banks are ok with corporate PSCs

Yes. But even then, the banks will want to understand who really controls the company.

Responding “the employees do” may be true, but it won’t be one of the tick boxes they have on their screen!

In practice this means they’ll often want details of the human trustees. Those people are the PSCs of the EOT trustee company, and the EOT trustee company controls the trading company.

Hence as far as Companies House is concerned, the trustees control the trading company, albeit indirectly.

Personal data and ID for trustees

Any particular banks better/worse than others?

At time of writing, the main “challenger” banks (Starling/Monzo) won’t cater to companies with corporate PSCs. So they’re immediately ruled out.

Beyond that, most of the high street banks will accommodate EOTs. You just may have a few frustrations when their staff who don’t understand EOTs try to fit you into their tick box options.

Persevere with it, possibly being that “I’d like to speak to your manager please” person(!), and you should eventually get there.

As above, the only oddity we’d expect is they may want details of the trustees.

Non-bank financial technology companies

Plus there are organisations like Revolut, who aren’t technically a bank.

Revolut act broadly like a bank. They can set up an account for you which can make and receive payments.

They won’t offer an overdraft. And you can’t pay in cash or cheques. But they can provide debit cards, and accept direct debits. In the modern world this is sufficient for many businesses.

The technicalities of what Revolut are/aren’t is beyond the scope of this blog post. But from a practical perspective, they can be a useful option.

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Summary

Banking can prove a modest frustration for companies soon after they transition to an EOT model. It’s still fairly niche, so not that well understood:

• The EOT trustee company typically doesn’t need an, so we’re talking about the trading company.
• Modern challenger banks (at time of writing) don’t cater to EOTs due to corporate PSC.
• Trustees (including employee and independent) may find banks wanting personal details.
• Unfortunately you won’t fit into a nice neat box for them, so be prepared for queries.
• Most high street banks should be able to cater to you.

Hopefully in time the EOT model will become more well know, hence less “odd” for banks to deal with.

If you are interested in finding out more about transitioning to an EOT, get in touch with us at Go EO to see how we can help.