A law firm specialising in employee ownership, which has advised other law firms on setting up employee ownership trusts (EOTs), has itself become 100% owned by its employees.
Robert Postlethwaite, founder and managing director of Postlethwaite Solicitors, predicted “noticeable growth” in the number of law firms going down this route.
“There is a realisation that the important talent in a firm is not just found in senior lawyers,” he said. “It is often difficult for firms to find new partners willing to invest their own money or able to do so.
“This is a proven alternative to traditional partnership and there is expertise available for firms needing help to move to employee ownership. The tax reliefs are the icing on the cake.”
Mr Postlethwaite said the firm had advised three law firms on transferring to an EOT, including Family Law Group, which has 10 offices in central England and made the move in February last year.
Postlethwaite, which has nine staff at offices in London and Leeds, became an alternative business structure in 2016 to extend employee ownership. An EOT has now bought 100% of the firms’ shares.
Mr Postlethwaite said the firm’s four shareholders would be repaid over a fixed, undisclosed period. The two main shareholders, himself and solicitor David Reuben, will remain in their posts as directors.
He said the directors “always thought 100% was the right way to go” but the move to an EOT was delayed for 18 months by the pandemic.
Mr Postlethwaite said the firm had advised companies on around 120 EOTs so far, across a broad range of sectors.
The motivation was often “cultural”, with firms feeling that employee ownership was “right for their business or people”.
He went on: “It offers a succession solution, where selling to a third party is not possible or desirable. Company owners are often quite loyal to their employees.
“There is also the belief that employee ownership will unleash latent energy in the business and help with further growth.
“You have to be realistic. Overall, we think businesses will tend to be successful in a number of ways, but employee ownership is not a panacea guaranteed to improve every business.”
Mr Postlethwaite said the directors of Postlethwaite Solicitors were now accountable to the trustees of the EOT, who were both employees of the firm and would be joined by an independent trustee over the next 12 months.
He added that having addressed “the ownership issue”, the directors would next be addressing “the succession issue”.
Postlethwaite Solicitors is a member of the Employee Ownership Association’s law firm panel.