Introducing Employee Ownership to a Law Firm
In April 2013, Postlethwaite took a key first step on the road to becoming one of the first employee-owned law firms in the UK, by becoming a company.
So we are now Postlethwaite Solicitors Limited (trading as Postlethwaite, Employee Ownership Lawyers), which means that our staff can now become shareholders.
As a law firm specialising in employee ownership, we are committed to involving as many of our team in our ownership as law firm regulation will allow.
Why are we doing this, and how do we plan to go about it?
I am convinced that spreading the ownership will help us become a better business. I think that everyone can be motivated by sharing in our ownership. Whilst we are fortunate in that each member of our team already thinks like an owner, we all still have plenty of unrealised potential. I believe that shared ownership will make us a stronger and smarter team, with benefits for our clients and our business. It’s also critical that we all like coming to work, and I see shared ownership as a way of making our workplace as positive and enjoyable a place as possible in which to spend our working days, although no-one is ever going to turn up purely for the love of it.
This approach will set us apart a little from the traditional law firm, in which ownership tends to be concentrated in the hands of a relatively small number of partners. We favour a different model for our firm, in which a much higher proportion of our team can rightly consider themselves as owners.
After much thought, we have decided that individual share ownership is going to be best for our company. We expect to continue to enjoy low staff turnover and are a relatively small practice, which we think will make individual share ownership easy to administer. Also, our people understand and are familiar with this form of ownership. A decisive factor is that we need permission from the Solicitors Regulation Authority to introduce new shareholders, and at best we think that it would take several months to get their permission for us to include an employees’ trust in our ownership. I don’t think our approach is necessarily the best solution for all companies – many may find that trust-based ownership is better for them – but we think individual ownership will work well for us.
At the time of writing, we have two individual shareholders, and we intend to extend the ownership to others later in 2013. We plan to do this by granting options to acquire shares, which will enable employees to buy shares after a future date paying a price equal to today’s share value. By doing this through an HMRC approved Company Share Option Plan (CSOP), we can ensure that any financial gain is taxed as capital gain when shares are eventually sold, rather than being subject to income tax. Grants of options may be combined with the opportunity to purchase some shares immediately.
We would have set up an EMI Option Plan if we could have, but as a law firm we are not allowed to. However, we think the CSOP will be a good route to employee share ownership.
At the moment, the rules make it relatively straightforward for each of our lawyers to become shareholders, but we’d have to change our structure to include our non-lawyers. We aren’t going to run before we can walk, so we will start with involving our lawyers in the ownership, then move on to considering the feasibility of involving other staff in the longer term.