Running an offshore Employee Benefit Trust share warehouse: a practical look from the inside

An offshore employee benefit trust share warehouse is often described as part of a company’s share plan infrastructure, but in practice it is much more than that. When it works well, it gives a company a controlled way to move shares between leavers, joiners, existing participants and the trustee, without each transaction becoming a new project in its own right.

A warehouse only works properly if the details are looked after. The trustee needs to understand the documents, the commercial reason for each transaction, the pricing basis, the funding route and the approvals required. None of that is especially glamorous, but it is where good administration and good governance make the difference.

In this article, Ogier Global’s Corporate Services team looks at what that means in practice.

Setting the ground rules

Before any shares move, the trustee needs to understand the framework it is operating within. An employee benefit trust (EBT) doesn't sit in isolation. It will usually form part of a wider set of arrangements that may include the company’s articles, shareholders’ agreement, investment agreement, valuation policy, leaver provisions and any relevant share plan rules.

The trustee must consider what it is permitted, required or prevented from doing?

That usually means checking:

• whether the EBT is formally bound into the company’s contractual framework, either as a party or through a deed of adherence
• what powers the trustee has under the trust deed and any related documents
• whether board, shareholder or investor approvals are needed before the trustee can buy or sell shares; and whether any restrictions apply to the shares being acquired, held or transferred

Getting this right at the outset avoids uncertainty later. It also gives the trustee a clear basis for acting when the company asks the warehouse to consider supporting a transaction.

When a transaction is proposed

Each share movement tends to be driven by a specific context. Someone may be leaving the business. A new joiner may need shares. The company may want to make shares available for future grants. There may be a wider corporate event, an internal reorganisation or a need to tidy up the cap table.

For the trustee, the reason matters. It is not enough to know that shares are moving from A to B. The trustee needs to understand why the transaction is happening and how it fits within the company’s agreed arrangements.

A good company recommendation to the trustee should usually explain:

• why the shares are being bought or sold
• who the parties are
• how the price has been determined
• whether any leaver provisions apply
• whether the transaction is consistent with the articles, shareholders’ agreement investment agreement and share plan rules and
• what approvals have already been obtained or are still required

A short, well-prepared rationale can be very helpful for the trustee’s decision-making and for the transaction record keeping.

Pricing and funding the warehouse

The price may be set by a formula in the articles, by a valuation policy, by a recent funding round, by the board, by agreement between the parties or by the leaver provisions. Whatever the mechanism, the trustee needs to be satisfied that the proposed price is supported by the relevant documents and the circumstances of the transaction.

This is particularly important where the EBT is buying shares from someone who is not a beneficiary. In those cases, the trustee should be comfortable that it is not overpaying and that the transaction is properly connected to the purposes of the trust.
An EBT needs the means to buy shares. In most cases, that funding comes from the company or another group company, either as a contribution, loan or other agreed funding arrangement.

The trustee should understand how funding is provided and documented. For loans, repayment terms, interest, consistency with the trust deed and company requirements and whether tax or accounting advice is needed should be conisdered.

Not every transaction will involve cash moving through the trustee’s bank account. In some private company structures, completion may be dealt with through book entries, payment direction letters or agreed set-off mechanics. That can work perfectly well, provided the documentation is clear and the accounting entries match the legal steps being taken.

What matters is that the funding route is understood, approved and capable of being evidenced.

Executing the transaction

This is the part that often looks the most straightforward: sale agreements, transfer forms, approvals, register updates and completion mechanics. In reality, it only feels straightforward if the groundwork has been done properly.

A typical warehouse transaction may involve:

• a sale and purchase agreement or share transfer agreement
• a stock transfer form or equivalent transfer instrument
• trustee resolutions or minutes
• company board approvals
• shareholder or investor consents, if required
• confirmation of any stamp duty or transfer tax position
• updates to the register of members, cap table and trustee records

The details need to line up: dates, execution, completion, signatures, conflicts and any conditions to completion. Once the transfer is complete, the register should be updated promptly and the trustee’s records should show the final position.

These are practical points, but they are also governance points. If they are handled properly, the warehouse remains reliable. If they are missed, they can create issues that only appear much later.

The trustee’s final check

Before completion, the trustee should consider the following:

• are the documents consistent?
• is the price supported?
• has funding been dealt with properly?
• are the relevant approvals and confirmations in place?
• are the transfer documents ready?
• will the documents be held to the trustee's order pending their execution?
• will the company’s register and the trustee’s records be updated immediately after completion?

That above may feel somewhat procedural, but it is often the difference between a clean transaction and one that causes questions later or poses unintended issues.

For an active warehouse, the aim should be consistency. Each transaction should follow a recognisable process, with enough flexibility to deal with unique circumstances that may arise but enough discipline to make sure the same core points are always covered.

Looking ahead: PISCES and private markets

The UK’s PISCES initiative may also change how private company share transfers are managed in the future. If private market infrastructure becomes more standardised and more digitised, EBTs may increasingly interact with electronic registers, faster settlement processes and more transparent internal market activity.

For companies with active share warehouses, that could be helpful. Leaver buybacks, secondary transfers and allocations to joiners may become easier to administer if the underlying market infrastructure becomes more efficient.

With Bullish's recent acquisition of Equiniti, could we even see a future world where private company's shares are tokenised, the share cap table on the blockchain and liquidity remaining controlled but accessible?

Conclusion: a warehouse that works

A well-run EBT share warehouse is not just an administrative convenience. It helps a company manage internal share liquidity, support its incentive arrangements and maintain a clean and credible ownership structure.

When the company, trustee and advisers work together in a collaborative way, the warehouse becomes more than a place where shares are held. It becomes a practical part of the company’s long-term equity strategy.

How Ogier can help

Ogier Global Employee Incentives' Team supports companies with the establishment and ongoing administration of employee benefit trusts, nominee arrangements and incentive based structures. Our team has experience working with listed and private companies, including FTSE 100 and FTSE 250 groups, and regularly supports employee incentive and executive share plan arrangements.

For an EBT share warehouse, we can help with the practical administration, including trustee decision-making, transaction coordination, funding mechanics, execution of transfer documentation by DocuSign, record keeping and reporting. We also help clients identify the practical points that can otherwise be missed.

Our secure Ogier Connect portal can also give authorised client contacts access to key documents, transaction histories and balances, helping to support transparency and ease of information flow.

By combining fiduciary oversight with practical corporate administration experience, Ogier helps companies operate their share warehouses in a way that is efficient, consistent and properly governed.

To discuss how Ogier can support your EBT, share plan or nominee arrangement, please contact a member of our Employee Incentives team.

About Ogier

Ogier is a professional services firm with the knowledge and expertise to handle the most demanding and complex transactions and provide expert, efficient and cost-effective services to all our clients. We regularly win awards for the quality of our client service, our work and our people.

Disclaimer

This client briefing has been prepared for clients and professional associates of Ogier. The information and expressions of opinion which it contains are not intended to be a comprehensive study or to provide legal advice and should not be treated as a substitute for specific advice concerning individual situations.

Regulatory information can be found under Legal Notice