The founder trustee

The purpose of the role

There are usually two reasons for the appointment, and both are legitimate.

The first is knowledge. You built the business. You understand its customers, its history, its cycles and its people in a way nobody else on the trustee board does, and that experience is worth having in the room.

The second should be acknowledged openly: you are usually still owed a substantial part of the purchase price. The seat lets you see that the business is being run well, that it will survive into the future, and that you are going to be paid. That is a reasonable concern, but it is also a conflict of interest. Both points need to be recognised and managed.

How the role is appointed

Unlike the other trustee roles, a founder trustee appointment is often agreed at the former owner’s request as part of the transaction.

The limited participation requirement

Former owners and persons connected with them must not make up half or more of the trustee directors. This means they cannot form a majority or exactly half of the board.

So a board of two founder trustees does not work. Two of four does not work. Two of five does.

The requirement can be breached unintentionally, for example if another trustee director resigns. The board should therefore keep its composition under review and confirm the legal position applying to the transaction.

Conflicts to manage

Deferred consideration creates an ongoing conflict. Discussions about cash, investment, borrowing, bonuses and growth may all affect the timing or certainty of payment.

Declare it, and keep declaring it. Expect to leave the room for any item bearing directly on the timing, security or acceleration of what you are owed. Where an item directly affects the timing, security or acceleration of payment, withdrawal from the discussion may be appropriate and should be considered under the agreed conflicts procedure.

There is a second conflict which is harder to name. You may be asked to approve, as a trustee, a strategy you would not have chosen as an owner. That is not a conflict of interest, but it is a conflict of instinct, and it catches founders more often than the money does.

Using influence appropriately

Your view might carry more weight than anyone else’s, whether or not you intend it to. Discussions might end once you have spoken, because people feel they should defer to somebody who was their boss until recently.

Remember that you chose employee ownership because you recognised the need to address succession and to secure the future of the business. Allowing others to develop their own authority and judgement is part of that succession — not a loss of influence to be resisted.

It is worth actively managing: speak later rather than earlier, ask more than you assert, and notice when agreement arrives too quickly. A board that routinely defers to the founder is not exercising the independent judgement required of it.

Common pitfalls

• Sitting through discussions about the money you are owed.
• Treating the trustee board as the route back to control you gave up at completion.
• Speaking first, and often.
• Losing track of the independence arithmetic after somebody else resigns.
• Remaining in the role without periodically considering whether the appointment still serves the board and the beneficiaries.