What is a Successor Trustee?

You already have a trustee appointed, but they are coming to the end of their term, or a change is needed. Appointing the next trustee is when you are appointing a successor trustee. But how do you go about this, and how is it different from the first time you appointed an independent trustee?

When?

What is driving the need for a successor trustee?

Has your current independent trustee resigned, or come to the end of their tenure?

Don’t see this as a negative, see it as an opportunity to bring in new ideas and opportunities to have slightly different conversations within the boundaries of the role of the trust.

In most cases, that transfer of responsibility from one independent trustee to another is moving from one professional to another.

In some cases, the move is driven by the trust, and/or the company, seeking a different individual or different skills. If your first appointee was a transaction expert, do they also have the experience to contribute when the transaction has passed, and EO within the company is evolving beyond the financial and legal framework?

Equally, you may have appointed an EO expert with clear guiding principles of what EO should be. Once these have been understood and adjusted to your company and trust, are you looking for more flexible and bespoke knowledge to support your continued evolution?

Why?

Why is appointing a successor trustee different to appointing your first independent trustee?

Firstly, you will have become more confident in your position as an employee owned business. This is both through the company and its employees understanding more, researching and networking. Even if this hasn’t happened, having distance from the transaction and its implementation has allowed breathing space for stability to have returned.

Secondly, you will have received the benefit of the expertise, experience and knowledge of your current independent trustee.

Both of these factors mean that you are appointing from a position of knowledge and experience. Hence, you are looking to build on what is already in place, not replicate it.

How?

Appointing your next trustee is an opportunity to reflect on their tenure of appointment. How far you have come, what you have learnt, what insights have been provided? Take time to do this review, then consider what the next period of the company and the trust will look like.

Are there any milestones that are upcoming? Such as fully repaying your vendor loan, progressing leadership succession plans, rotating fellow internal trustees, launching new EO related initiatives. If so, do you want your current trustee to stay until that milestone, or are you looking for a new trustee to support before the milestone is reached.

Then consider what skills and experience your current trustee has provided. Do you want to replicate these? Are there other aspects or areas of knowledge that would be beneficial at your current stage?

Trustees appointed during the time of transition may grow and develop with the business as it evolves its EO, or they may not. Whilst the role of the independent trustee is fairly standard, incumbents vary considerably in terms of knowledge, experience but also behaviours, personality, attitude and availability. Consider what it is that you would value, and seek that in your next independent trustee.

Your Trust

Finally, as well as considering the individual, also consider your trust itself. Is it a passive shareholder, or a pro-active contributor to the activities of the business.

If it is more active, in what way does this get delivered? Is the independent trustee part of this, or a checking point for activities undertaken by internal trustees and others?

In practice most trusts fall between passive and pro-active. They are active when needed, have a rhythm of trust meetings and ad hoc connectivity between meetings.

The Practicalities

The appointment of a new independent trustee, is usually the responsibility of their fellow trustees, not the company board. However, you would expect both the trustee and the company board to agree on the final candidate to be appointed.

In practice, the process is often led by the trustees, with input or involvement of company directors.

It may also be delegated to in-house HR functions, if they are available. If so, ensure they understand the nuances of the role and how it is different to recruiting an employee.

In practical terms, once the individual is agreed, a trust board minute should evidence the resignation and appointment of both individuals. Companies House records (if the trust is constituted through a formal trust company) should be updated accordingly.

In most cases, the departing independent trustee should provide a handover to the new trustee. But the company and fellow trustees should also provide background information, copies of previous trust meeting minutes and a set of the relevant transaction documents. They should also share their perspectives on the next stages and why the appointed individual was the best fit for the role, their EO company, the trust and the future.

Concluding thoughts

Although any change can create uncertainty, appointing a new independent trustee should be seen as a positive opportunity.

Your EO company has matured, your trust has a rhythm of activity, and the mechanics of the transition transaction have been operationalised. Bringing a new perspective at this time can be invigorating and energizing, creating continued forward momentum and evolution.

IDT provides both initial and successor trustees to EO companies. If you would like to discuss this topic or find out more, contact us to arrange a confidential chat at info@directorsandtrustees.co.uk