UK financial planning business Paradigm Norton has become majority owned by its employees.
Converting to employee ownership involves establishing an employee ownership trust (EOT).
The trust then has a corporate trustee, namely Paradigm Norton Employee Ownership Trustee; which is a new company with no share capital.
The trustee purchased 80% of the shares of Paradigm Norton on 13 March 2019 for a deferred consideration to be paid to the sellers over 10 years.
It will hold the shares in trust for up to 125 years on behalf of all of the employees.
The company statement did not reveal who owns the remaining 20% stake.
In the board we trust
The trust is formed of eight members; including an independent chair currently held by the former chief executive Patrick Burns; the firm’s chief executive Barry Horner as board director; three employees appointed from members of staff; and three employees appointed by the board.
All of Paradigm’s employees will be paid a bonus, which is capped at £3,600 ($4,577; €4,021) per year, according to ETO rules.
Apart from changes to the board, everything will be “business as usual”, the firm said; since the name, leaders, team, service offered, fees, terms and conditions and office locations will remain the same.
A growing trend?
The firm joins some 350 other companies in the UK to have set up an EOT, which was made possible by the UK Finance Act, passed in 2014.
The legislation allows firms to be owned collectively for the benefit of those working in them.
Paradigm’s board started exploring the transition to employee ownership in 2017 after receiving legal advice from London-based firm Fieldfisher, where one of the partners was the author of the review which formed the UK government’s bill.
“I am delighted at the news of the EOT; in my view this move gives both our clients and our team members certainty around the long-term ownership, direction and stability of Paradigm Norton, crucial factors when building a financial plan or career,” said Ruth Sturkey, client director at Paradigm Norton.