ESOPs in Listed and Unquoted Companies Compared

Unlike tomatoes, the word ESOP is pronounced in precisely the same way in the UK as in the USA. However, that similarity is beguiling. There are a number of similarities between the UK and US versions of an ESOP, but there are differences. Both the US and the UK ESOP are based on a discretionary trust intended to benefit the employees of the sponsoring company. That trust will look to the sponsor for financial support and will acquire shares in the sponsor for distribution to the sponsor’s employees. Similarly, both the UK and the US ESOP will have the capacity to borrow money from a third party. But they exist in different tax and legal environments, which shape their commercial roles.