Legal documents can be difficult to understand. On this page we've summarised the purpose of each document, as well as providing a summary of the content. Click any box to find out more.
Share purchase agreement
The share purchase agreement is the main legal contract that sets out the terms under which the existing shareholders sell their shares to the Employee Ownership Trust. It confirms the parties involved, the number and value of shares being sold, the payment structure, and includes warranties from the sellers about the state of the business.
Document summary
Interpretation
Defines key terms used throughout the agreement to ensure clarity and avoid ambiguity in interpretation.
Sale and Purchase
Outlines the agreement for the Sellers to transfer ownership of the shares to the Buyer, including legal assurances and rights attached to the shares.
Purchase Price
Details how the total price for the shares is calculated, split into immediate and deferred payments, including the timing and conditions of instalments and interest for late payments.
Completion
Specifies the formal process for finalising the share sale, including delivery of documents and mutual obligations required at the point of transfer.
Power of Attorney
Grants authority to the Buyer to act on the Sellers’ behalf in relation to shareholder matters until the legal transfer of shares is formally registered.
Post Completion Obligations
Commits the Buyer to maintaining key conditions related to employee ownership trust status and tax compliance for a defined period after completion.
Warranties
Provides legally binding assurances from the Sellers about the state of the company, covering its operations, finances, legal standing, and other risks, to protect the Buyer from undisclosed issues.
Restrictions on the Sellers
Imposes non-compete, non-solicitation and confidentiality obligations on the Sellers to safeguard the company’s goodwill and business relationships after the sale.
Seller Undertaking
Ensures the Sellers avoid actions that could jeopardise the Buyer’s tax position and affirms their separation from any future interest in the trust.
Further Assurance
Requires the Sellers to assist with any necessary follow-up actions or documentation needed to fully implement the agreement.
Confidentiality
Prohibits disclosure of sensitive business information by any party, except under specific permitted circumstances.
Assignment
Prevents the parties from transferring their rights or obligations under the agreement without mutual written consent.
Entire Agreement
States that the written contract represents the full and final agreement, overriding any previous communications or understandings.
Variation and Waiver
Specifies that changes to the agreement must be made in writing, and that failing to enforce a right once does not prevent future enforcement.
Notices
Outlines how formal communications under the agreement must be delivered and when they are deemed to be received.
Severance
Ensures that if any part of the agreement is invalid or unenforceable, the rest remains effective and legally binding.
Counterparts
Allows the agreement to be signed in separate copies by different parties, all of which together form a single binding document.
Limitation of Trustee’s Liability
Limits the Buyer trustee's liability to the value of the trust's assets, protecting individual trustees from personal liability.
Third Party Rights
Clarifies that only the parties to the agreement have rights to enforce its terms.
Governing Law and Jurisdiction
Establishes that the agreement is governed by the laws of England and Wales and that legal disputes will be handled by courts in that jurisdiction.
Schedule 1: Seller and Company Details
Provides factual information about the Sellers and the Company, including shareholding details and registered particulars.
Schedule 2: Warranty Disclosure
Lists exceptions to the warranties, disclosing any known issues that could affect the accuracy of the warranties given.
Schedule 3: Claims Procedures
Sets out the process and limitations for making claims against the Sellers if warranties are breached, including thresholds, notice periods, and time limits.
Trust deed
The trust deed sets up an Employee Ownership Trust to hold shares in a company on behalf of its staff. It explains who can benefit from the trust, and the rules the trustees must follow. The aim is to ensure all staff are treated fairly, and follow UK legal rules for employee-owned businesses.
Document summary
Interpretation
Establishes the meanings of key terms used in the deed to ensure consistent understanding throughout the document.
Beneficiaries
Defines who qualifies to benefit from the trust and the conditions they must meet, while explicitly excluding certain individuals such as previous shareholders.
Discretionary trust of capital and income
Outlines how the Trustee may distribute the trust’s income and capital fairly among beneficiaries, subject to strict equality principles and objective criteria.
Perpetuity period
Sets the maximum duration for which the trust can legally exist, typically up to 125 years.
Trusts at expiration of Trust Period
Specifies how any remaining trust assets are to be dealt with once the trust period ends, ensuring proper distribution or charitable donation.
Additions to Trust Fund
Allows the trust to accept gifts or other contributions to grow its assets.
Waiver of Dividends
Directs the Trustee not to receive dividends on certain shares unless otherwise instructed by the Company.
Investment powers
Grants the Trustee broad authority to invest trust funds in various forms, while limiting certain risky or inappropriate investments.
Additional powers
Provides further operational powers to the Trustee, as detailed in a schedule, to manage the trust effectively.
Power of resettlement
Enables the Trustee to transfer trust assets into another trust under certain legal and tax-compliant conditions.
Personal interests of Trustees
Permits Trustees to act despite personal interests, provided they declare any material conflicts to ensure transparency and legitimacy.
Protection of Trustee
Offers legal and financial protection to Trustees against liabilities incurred in performing their duties, except in cases of misconduct.
Trustees
Details the rules for appointing, removing, and retiring Trustees, as well as their composition and the minimum number required to act.
Information supplied by any Group Company
Allows the Trustee to rely on information provided by the Company or its subsidiaries without independent verification.
Power to amend trust deed
Gives the Trustee authority to make changes to the deed, within strict boundaries that preserve core principles such as fairness and beneficiary rights.
Costs
Clarifies how costs related to the trust’s creation and administration are to be paid, primarily by the Company or Group.
Receipts
Authorises designated individuals to handle payments and receipts on behalf of the Trustee, with safeguards for third parties relying on those actions.
Remuneration of Trustee
Allows Trustees to be compensated for their services, particularly where they provide professional or corporate trustee services.
Governing law
Establishes that the deed is governed by the law of England and Wales.
Jurisdiction
Specifies that legal disputes must be settled in the courts of England and Wales.
Change of governing law
Permits the Trustee to change the legal jurisdiction governing the trust, under certain conditions that protect its legality and purpose.
Irrevocability
Confirms that the trust, once created, cannot be revoked or undone.
Exclusions and limitations
Prevents the misuse of trust assets by ensuring they cannot benefit the Company, except where explicitly permitted.
Assignment and other dealings
Restricts the transfer or assignment of rights under the deed to preserve the personal nature of trust entitlements.
Notices
Lays out the methods and timing for sending official communications between the parties.
Claimants' obligations
Requires anyone seeking a benefit from the trust to provide necessary information and allows deductions for taxes or care-related payments.
Counterparts
Allows the deed to be signed in multiple copies, each of which counts as an original, and permits electronic signing and delivery.
Schedule 1 - Additional powers of Trustee
Provides a list of supplementary powers for managing trust assets, including investment decisions, granting options, borrowing funds, paying taxes, and delegating administrative functions.
EOT company articles
The rulebook for the EOT company. Setting out how the company is run, who has what powers, and how decisions get made.
Document summary
Introduction
Establishes the legal framework, terminology, and interpretive rules governing the Articles, ensuring consistency and clarity throughout the document.
Object
Defines the Trust Company's sole purpose as acting as the corporate trustee of an Employee Ownership Trust or similar trust structure.
Powers
Authorises the Trust Company to undertake activities necessary or helpful to fulfilling its object, including financial and operational actions.
Income
Ensures all income is used solely to further the Trust Company's object and restricts distributions to members, with narrowly defined exceptions.
Winding up
Requires any remaining assets on dissolution to be transferred to a similar or charitable entity, not distributed to members.
Guarantee
Limits members’ financial liability to £1 and sets out the scope of their obligations if the company is wound up.
Number of Trust Directors
Mandates a minimum board structure with representation from employees, founders, and independents, and imposes residency and membership conditions.
Appointment and Removal of Trust Directors
Outlines how directors are appointed or removed across different categories, ensuring a controlled and balanced governance process.
Secretary
Grants directors the authority to appoint or remove a secretary, allowing flexibility in administrative arrangements.
Unanimous decisions
Allows directors to make decisions without a formal meeting if all eligible directors agree, enabling efficient decision-making.
Calling a Trust Directors' meeting
Provides procedures for convening meetings and requires regular board meetings to support ongoing governance.
Quorum for Trust Directors' meetings
Defines the minimum attendance and participation needed for board meetings to proceed, including provisions to avoid deadlock.
Casting vote
Provides a mechanism to resolve tied votes by assigning the casting vote to the longest-serving Independent Director.
Trust Directors' conflicts of interest
Establishes how conflicts of interest are disclosed, managed, and authorised, promoting ethical and lawful governance.
Records of decisions to be kept
Requires directors to document decisions formally, creating a reliable governance record.
Membership
Restricts membership to current directors and automatically links it to their appointment and removal, simplifying membership management.
Transfer of Membership
Prevents voluntary membership transfers and outlines what happens if a sole member dies or becomes bankrupt.
Votes of members
Confirms each member’s equal voting rights at general meetings, supporting democratic decision-making.
Poll votes
Allows a poll to be requested for formal voting and clarifies how withdrawn demands affect vote outcomes.
Proxies
Details how proxy votes are submitted and modifies standard rules to ensure practical and flexible procedures.
Means of communication to be used
Specifies how official communications must be delivered and when they are deemed to be received, ensuring legal certainty.
Indemnity and insurance
Protects officers from personal financial loss resulting from their duties and permits insurance or financial support where allowed by law.
Changes to the Articles
Requires approval from both a supermajority of directors and the Company before any amendments can be made, safeguarding the constitution.
EOT company board minutes
These lay out the thought process and decisions made by “the trustees” (technically the directors of the corporate trustee company), approving the share purchase. They cover approving conflicts of interest, adoption of new EOT friendly articles, the purchase of target company shares from the previous owners, and steps agreed to establish the trust itself.
Document summary
Notice and quorum
Confirms that the meeting was validly convened and attended by enough directors to conduct official business.
Declarations of interest
Ensures transparency by requiring directors to disclose any personal interests related to the matters being discussed, in compliance with legal and constitutional obligations.
Authorisation of director conflict
Addresses the potential conflicts of interest for specific directors by initiating a process to seek formal member approval, since the company's existing rules don’t permit the board to authorise such conflicts themselves.
Approval of the director conflict resolution
Records the board’s formal decision to proceed with the member resolution to authorise the director conflicts, framing it as a measure that benefits the company overall.
Meeting adjourned and reconvened – approval of director conflict
Documents the temporary pause of the meeting to allow members to approve the conflict resolution and confirms that the required approval was obtained before resuming business.
Adoption of new articles of association and trustee appointment
Introduces structural changes to the company’s governance and formalises the company's role as the sole trustee of the employee ownership trust, forming the legal foundation for the transition to employee ownership.
Meeting adjourned and reconvened – adoption of new articles of association
Suspends the meeting to obtain member approval for the new governance arrangements and confirms approval was achieved before moving forward.
Acquisition of shares
Outlines the plan for the employee ownership trust to purchase a majority stake in the trading company, including the structure, valuation, and method of funding.
Acquisition documents produced to the meeting
Presents the legal documents and supporting materials necessary to complete the share acquisition and ensure compliance with regulatory and tax requirements.
Consideration of acquisition documents
Details the rationale behind the transaction, including the mechanics of payment, tax implications, and how the structure supports long-term employee ownership.
Acquisition resolutions
Records the board’s formal approval of the acquisition documents and includes contingency plans for maintaining proper board composition until 2030.
Filing and administration
Authorises the administrative follow-up needed to legally register the changes and ensure company records and public filings reflect the meeting’s outcomes.
Close
Marks the formal end of the meeting after all business was concluded.
EOT company shareholder resolutions
Similar to the board minutes above, except some decisions legally must be made by shareholders, not directors. Though here, as a company limited by guarantee (not by shares), the closest thing to “shareholders” will be the same people as the trustee directors above.
Document summary
Ordinary Resolution: Authorisation of Director Conflict
Permits named directors to continue participating in the employee ownership project, even where their roles may overlap with company interests, without breaching conflict of interest duties.
Agreement (Ordinary Resolution)
Provides a formal method for eligible voters to indicate their acceptance of the resolution through signature and date.
Notes (Ordinary Resolution)
Explains how to return the signed document, clarifies that no response equals non-agreement, and highlights rules about revoking agreement and voting rights of joint shareholders or authorised signatories.
Special Resolution: Adoption of New Articles
Proposes replacing the current governing rules of the company (articles of association) with a new draft set.
Agreement (Special Resolution)
Confirms how eligible voters can formally approve the adoption of the new articles by signing and dating.
Notes (Special Resolution)
Provides instructions for returning the signed resolution and outlines conditions for validity, including deadlines and procedural clarifications for joint holders and authorised representatives.
Confirmation of Passed Special Resolution
Formally records that the special resolution to adopt new articles was passed by written agreement.
Target company articles
The rulebook for the company that's being sold. Setting out how the company is run, who has what powers, and how decisions get made. Among other things, this will set out what decisions require trustee approval, i.e. decisions company directors can't simply make on their own.
Document summary
Introduction
Defines key legal and operational terms used throughout the document to ensure clarity and consistency in interpretation. Also sets the scope of how statutory and model articles apply or are amended.
Objects
Affirms that the company is not restricted in its business activities, granting it broad operational powers under the Companies Act 2006.
Private Company Status and Liability of Members
Establishes the company’s legal structure as a private entity limited by shares, clarifying that members' financial liability is limited to any unpaid share capital.
Directors
Sets out rules on how directors make decisions, how meetings are convened and conducted, and how conflicts of interest are managed. It defines director appointments, quorum requirements, and procedures for record-keeping and secretarial appointments.
Share Capital
Outlines the composition of the company's share capital and restrictions on joint ownership, reinforcing the governance around share issuance and ownership.
Income
Specifies how company profits may be distributed as dividends among shareholders, based on their shareholding and payment status.
Capital
Details how remaining assets are to be distributed among shareholders if the company is dissolved or undergoes a capital reduction.
Unissued Shares
Requires shareholder approval before new shares or rights to shares can be issued, ensuring control remains with existing shareholders.
The EOT Shareholding Requirement
Ensures that the Employee Ownership Trust (EOT) maintains majority control of the company by restricting transfers or allotments that would dilute its holding.
Trusts
Acknowledges the EOT’s role in holding shares in trust for employees and limits the company’s obligation to monitor or enforce trust arrangements.
Share Transfers
Gives directors discretion to refuse share transfers, protecting against unwanted changes in ownership unless otherwise permitted.
Permitted Transfers
Specifies circumstances under which share transfers must be accepted, primarily to or from the EOT or in relation to employee schemes or succession events.
Drag Along
Allows majority shareholders to compel minority shareholders to sell their shares during a sale, facilitating streamlined exits or transactions.
Tag Along Rights on a Change of Control
Gives minority shareholders the right to sell their shares alongside majority shareholders during a change of control, ensuring equitable treatment.
Transmission of Shares
Provides for the handling of shares when ownership changes due to death or bankruptcy, ensuring continuity and legal compliance.
Quorum for General Meetings
Sets the attendance requirements for valid general meetings, primarily centring authority on the EOT to control corporate decisions.
Chairing General Meetings
Establishes procedures for appointing someone to lead general meetings, ensuring orderly conduct and continuity.
Poll Votes
Outlines the mechanics for demanding a poll vote at general meetings to ensure fair decision-making based on shareholding.
Proxies
Clarifies procedures for appointing proxies to vote on behalf of shareholders, reinforcing rules around notice and delivery.
EOT Consents
Lists decisions that require the prior approval of the EOT, providing the trust with control over significant business and financial actions.
Means of Communication to be Used
Specifies acceptable methods for official communications and how delivery is deemed to occur, ensuring legal validity and traceability.
Employee Owned
Recognises the company’s employee-owned status and commits the board to transparency and engagement with employees regarding performance and strategic direction.
EOT
Requires the company to provide regular financial and business updates to the EOT to support its oversight role on behalf of employees.
Indemnity and Insurance
Provides protection for directors and officers against liabilities arising from their roles, subject to legal limitations, and permits the company to maintain insurance cover.
Target company board minutes
These lay out the thought process and decisions made by the directors, approving the share sale. It covers approving conflicts of interest, adoption of new EOT friendly articles, the sale of the company's shares from the previous owners, and steps agreed to establish the trust itself.
Document summary
Present
Identifies the directors attending the meeting and confirms leadership of the session, ensuring formality and accountability in proceedings.
Notice and Quorum
Establishes that the meeting is valid under the company's rules, confirming that enough directors were present to make decisions.
Declarations of Interest
Ensures transparency by recording any personal interests directors may have in matters being discussed, fulfilling legal duties under the Companies Act.
Authorisation of Director Conflict
Sets out the intention to allow directors to remain in position despite potential conflicts, by obtaining formal member approval due to restrictions in the company’s constitution.
Approval of the Director Conflict Resolution
Formally approves the draft resolution for member circulation to authorise the conflicted directors' continuation, ensuring the process aligns with company law obligations.
Meeting Adjourned and Reconvened – Approval of Director Conflict
Records procedural steps taken to distribute and secure approval of the conflict resolution by members, thereby validating conflicted directors’ ongoing participation.
Employee Ownership Trust Transaction
Introduces and seeks approval for the shift to employee ownership by establishing a trust that will hold company shares for the benefit of all employees.
EOT Documents Produced to the Meeting
Details the key legal and financial documents presented to support the employee ownership transaction, forming the basis for informed board consideration.
Consideration of EOT Documents
Explains the structure and rationale of the trust and share sale process, highlighting how the transaction benefits employees and has been pre-cleared by HMRC.
Contribution to EOT
Describes how the company will fund the initial trust setup and payments, ensuring the transaction can proceed lawfully and without adverse tax consequences.
EOT Transaction Resolutions
Approves all aspects of the employee ownership transition, from legal documents and funding to the necessary director authorisations for implementation.
Post-transfer Matters
Outlines the steps required to finalise the share sale, including the execution and registration of transfers and updates to internal company records.
Share Transfers
Presents the draft share transfer instruments to legally move ownership of shares to the trust, completing the key transactional element.
Post Transfer Resolutions
Approves the share transfers and authorises updates to statutory registers, enabling formal recognition of the new ownership structure.
Meeting Adjourned & Reconvened – Approval of Written Resolutions
Records the circulation and approval of resolutions necessary to finalise the transaction and confirms signing of the share purchase agreement.
Filing
Directs administrative actions to update official records with Companies House, ensuring compliance following completion of the transaction.
Close
Formally ends the meeting, signifying that all planned matters have been addressed and the meeting is properly concluded.
Target company shareholder resolutions
Similar to the board minutes above, except some decisions legally must be made by shareholders, not directors. Typically this will be approving the amended articles, and occasionally also a reorganisation of shares.
Document summary
Authorisation of Director Conflict
Allows specified directors to proceed with plans for employee ownership despite their potential personal interest, ensuring their actions won't be considered a conflict of interest or breach of duty.
Agreement
Collects formal consent from shareholders who approve the resolution, ensuring legal validity through written confirmation.
Notes (for Authorisation of Director Conflict)
Explains how shareholders can approve or decline the resolution, including procedural instructions for responding and the deadline for consent.
Redesignation of Share Capital
Enables the division of the company's existing ordinary shares into distinct classes, laying the groundwork for differentiated shareholder rights or future structural changes.
Adoption of New Articles
Replaces the company’s current governing rules with a new set of articles to align with changes such as share class redesignation or transition to employee ownership.
Agreement (for Redesignation and Articles)
Confirms shareholder approval of the two resolutions, ensuring both changes become legally binding through collective written consent.
Notes (for Redesignation and Articles)
Provides instructions for how shareholders should respond to the resolutions, the implications of silence, and guidance for joint holders or those acting under legal authority.
Confirmation of Resolution Passed
Formally records that the resolutions have been passed, creating a conclusive document for legal and procedural purposes.
Shareholder agreement
This will be relevant for “hybrid” situations, where the EOT doesn't own 100% of the shares. It sets out rights and responsibilities of the various shareholders.
Document summary
Definitions and Interpretation
Establishes the specific meanings of key terms used throughout the agreement and clarifies how the document should be read and interpreted.
The Business
Defines the scope of the company’s permitted activities and sets expectations for shareholder conduct in promoting and supporting the business.
Accounts and Information Rights
Outlines the company’s obligation to maintain proper accounting records and ensure transparency for shareholders through access to relevant financial information.
Company Covenants
Specifies commitments the company must uphold, including maintaining proper governance, reporting practices, and limitations on significant actions without shareholder consent.
Seller Directors
Provides rights to the Seller to appoint and remove directors under certain conditions, ensuring continued influence during the period in which obligations remain outstanding.
Profit Allocation Policy
Explains how profits will be distributed, especially in relation to deferred payments due to the Seller and how dividends are treated during this period.
Transfers and Allotments of Shares
Sets out rules restricting how and to whom shares may be transferred or issued, including requirements for adherence to the agreement by new holders.
Observance of Articles and Conflict
Mandates compliance with the company’s Articles of Association and gives this agreement precedence in the event of a conflict.
Confidentiality and Announcements
Protects sensitive company information by restricting disclosures, with limited exceptions where legally necessary.
Termination
Details when a party’s rights and obligations under the agreement end, particularly when they cease to be a shareholder or director.
Variation
Specifies that changes to the agreement must be made in writing and signed, and clarifies that waivers must also be formalised to be effective.
Severability
Ensures that if any provision is found to be invalid or unenforceable, the rest of the agreement remains effective, with possible substitution of enforceable terms.
Rights of Third Parties
Excludes enforcement rights for non-parties, limiting enforceability strictly to those who have signed the agreement.
Assignment
Prevents shareholders from transferring their rights or obligations under the agreement without unanimous consent.
Entire Agreement
Confirms that this document supersedes all previous understandings and forms the sole agreement between the parties regarding its subject matter.
Succession
Ensures the agreement continues to bind successors or permitted assignees, who can enforce its terms once they assume party status.
Notices
Defines how formal communications under the agreement must be sent and when they are deemed to be received.
Counterparts
Allows the agreement to be signed in multiple copies (including electronically), each of which is legally valid once all parties have executed one.
Third Party Rights
Restates that no external person or entity has rights under the agreement, even if mentioned in it.
Governing Law and Jurisdiction
Specifies that English law governs the agreement and that any disputes must be resolved in the courts of England and Wales.
Stock transfer forms
The stock transfer forms formally transfer ownership of shares from the selling shareholders to the Employee Ownership Trust. They record key details such as the name of the seller, the name of the buyer (the EOT), the number of shares being transferred, and the date of transfer. These forms are signed by the seller and need to be filed with HMRC.
Document summary
Consideration Money
Records the amount paid for the shares being transferred, serving as evidence of the transaction's value.
Registrar/Stock Exchange Completion
Reserved for use by the registrar or stock exchange to document administrative processing of the transfer.
Details of the Security
Identifies the company and describes the type and quantity of shares involved in the transaction.
Current Holder’s Details
Captures the registered owner's name and address, which ensures correct attribution and authentication of the transfer.
Transfer Authorisation
Provides legal authorisation from the current owner(s) for the transfer of shares to the new owner(s), confirming their intent and consent.
Signatures and Broker Stamps
Authenticates the transfer through signatures and stamps from brokers or agents, verifying the transaction’s legitimacy.
Transferee’s Details
Captures the full identity and address of the person or entity receiving the shares, for registration purposes.
Request for Register Update
Instructs the registrar to update the share register to reflect the new ownership details.
Endorsement for Stock Exchange Use
Used only in stock exchange transactions to detail how the shares have been allocated and to reconcile balances.
Certificate 1: Exemption Below Threshold
Used to certify that the transfer is exempt from stamp duty because the consideration is under £1,000 and not part of a larger transaction.
Certificate 2: Other Exemptions or No Consideration
Confirms that the transfer is exempt from stamp duty for other reasons, or because no payment is involved.