The transfer of the trusteeship of an Employee Benefit Trust (EBT) can often seem like a daunting task to most decision makers within a company.
However, the truth of the matter is it can be much more straightforward.
Why do companies transfer an EBT
There are usually one or more reasons for a company to consider undertaking the transfer of their EBT to a new trustee including:
- Excessive fees being charged, that are not compatible with the work being undertaken by the current trustee of the EBT;
- Relationship breakdown due to inadequate service by the current trustee, or lack of flexibility around processes or procedures; and
- Current trustee does not specialise in the provision of trustee services for EBTs, which may mean that standard transactions that occur may be far more complex or burdensome to process, than if the EBT was managed by a specialist EBT trustee.
Selection of a new Trustee
The next step once the company has come to the decision to begin the search for a suitable replacement trustee is to contact either their incentives advisor, share plan administrator or corporate broker (if company is listed) who should be able to recommend a number of suitable alternative trustees.
Once a new trustee has been selected by the company, the new trustee should be able to project manage the transfer of the trusteeship of the EBT, as such a transfer is a well-trodden path for a professional trustee.
How to transfer an EBT
The main steps to transfer the trusteeship are as follows:
- Agreement of applicable fees with the new trustee for the operation of the EBT and agreement of termination fees with retiring trustee.
- Completion of customer due diligence (KYC / AML) checks, in accordance with applicable legislation in the trustee jurisdiction, such as Jersey.
- Execution of a Deed of Retirement and Appointment (to be drafted by the Adviser), between the retiring trustee, new trustee and the company.
- Execution of any required Deeds of Novation (to be drafted by the Adviser) between the retiring trustee, new trustee and company, in respect of any formal agreements in place (e.g. Loan Facility Agreement or Linking Agreement (also known as a share supply agreement or operating agreement).
- Opening of brokerage / custody accounts (if the company is listed) and bank accounts in the name of the new trustee. Receipt of share and cash balances into such accounts from the retiring trustee.
- Creation of ledgers and receipt of opening balances from retiring trustee.
- Receipt of originals (or copies) of minutes of historic trustee meetings from the retiring trustee.
The Company’s role in the transfer of their EBT
The company can take comfort from the fact that the majority of the steps to be undertaken to transfer the trusteeship are undertaken by the new trustee and the retiring trustee. The main considerations for the company in respect of the transfer are:
- The appointment of a new trustee including the agreement of fees and services;
- To serve notice of removal to the retiring trustee (usually there is a relevant clause within the Trust Deed, for the appointment / removal of a trustee) and agree termination/transfer fees (negotiable in most cases); and
- The subsequent approval of the EBT transfer Deeds between all parties.
While it might seem daunting at first, the reality is it can be much simpler and there are multiple benefits to transferring the trusteeship of an Employee Benefit Trust including reduction of costs, service uplift or more flexibility around processes / procedures. As a market-leading EBT trustee with an internationally diverse client base of listed and unlisted corporates, JTC Employer Solutions is able to offer a broad range of EBT services.