Not if you’re setting things up well. The best way to avoid damaging conflict is to: Choose trustees carefully, especially the independent trustee Make sure directors understand the purpose of the trust and their duties to it Hold regular board and trust meetings with clear agendas Deal with disagreements early, not when they’ve festered If you’re thinking about setting up an EOT, or already running one and need governance support, we can help.

What Happens When Trustees and Directors Don’t Agree?

What Happens When Trustees and Directors Don’t Agree?
How to handle friction inside an Employee Ownership Trust.

Setting up an Employee Ownership Trust (EOT) is often one of the most positive decisions a business can make. But like any structure involving multiple stakeholders, things can get tense especially when trustees and directors don’t see eye to eye.

The good news? Most disagreements are manageable. The better news? You can plan for them.

At TS Partners, we help clients structure EOTs with good governance from day one, so when friction happens, everyone knows where they stand.

Here’s what to understand.

First, Let’s Be Clear on Roles

Directors are responsible for running the company, setting strategy, making operational decisions, and managing performance.
Trustees are responsible for ensuring the company is being run in the interests of the employee beneficiaries of the trust.

The trustees don’t get involved in day-to-day decisions. But they do oversee the business at a strategic level. Think of it like a board of governors in a school, not involved in timetables, but very interested in leadership, safeguarding, and values.

When Might They Disagree?

Disagreements often arise when:

The directors want to take risks (e.g. expansion, borrowing) and the trustees are more cautious.
The trustees believe employee interests are being ignored or sidelined.
The business underperforms, and trustees challenge leadership decisions.
There’s a mismatch in communication or expectations.

None of this is unusual. In fact, it’s a sign that the governance system is working, as long as both sides stay respectful and focused on the trust’s purpose.

How Are Disputes Resolved?

A well-drafted trust deed and shareholder agreement should include mechanisms for resolving disputes between trustees and directors. These might include:

Escalation procedures (e.g. bringing in the independent trustee or external advisors)
Defined voting thresholds for key decisions
Clear protocols around when trustees can intervene in company matters
Regular joint meetings to avoid conflict in the first place

When we structure EOTs at TS Partners, we help clients think through not just the rosy scenarios, but the awkward ones. Because planning for disagreement is a hallmark of good governance.

What About Removing a Director or Trustee?

It can happen. The trust may have the power to remove a director in serious cases, usually if they are acting against the interests of the trust or in breach of their duties. Similarly, trustees can be removed if they’re obstructive, absent, or acting improperly.

But these are exceptional situations. Most of the time, what’s needed is better communication, not a dramatic reshuffle.

So, Should I Worry?

Not if you’re setting things up well.

The best way to avoid damaging conflict is to:

Choose trustees carefully, especially the independent trustee
Make sure directors understand the purpose of the trust and their duties to it
Hold regular board and trust meetings with clear agendas
Deal with disagreements early, not when they’ve festered

If you’re thinking about setting up an EOT, or already running one and need governance support, we can help.

Need Clarity on EOT Governance?

We offer a free 15-minute consultation with a senior solicitor at TS Partners to help you understand how trustee and director roles can be structured for long-term stability.