As part of the “Policy Support for Industrial Resilience” webinar which took place on the 26.06.2020, Workers Buy Out, a national mechanism designed to save companies from crisis, was presented by Rita Piccinini with Reggiane Innovation Park. The Good Practice owner is Legacoop Emilia Ovest.
Workers Buy Out is an innovative national, regional and local instrument used whereby workers acquire ownership and control of a company which is facing closure. Employees wear the clothes of cooperative entrepreneurs, going from simple employees to company managers. Successful WBOs help to avoid unemployment and create new jobs, preserve wealth, professionalism and skills, maintain production units in the territory.
Image: Greslab
Legacoop is a cooperative federation which promotes the development of cooperation and mutuality, economic and solidarity relations of its member cooperatives and encourages the spread of cooperative principles/values. Legacoop can be found at national, regional and local level. In particular, Legacoop Emilia Ovest is the reference association of cooperatives in Reggio Emilia, Parma and Piacenza.
The WBO can be implemented not only in cases of corporate crisis or restructuring processes, but also in the face of difficult generational changes in family businesses.
1. Company crisis: a crisis situation usually leads to a guided liquidation procedure of the production facility. Workers decide to protect their job by investing their unemployment benefits and establishing a cooperative that could continue the activity with new strategic objectives and corporate governance.
2. Generational turnover: in family-run businesses, the company is sold to its employees who have acquired specific competences over years of employment rather than competing companies or multinationals.
The WBO pathway takes the following steps:
- Company in crisis: the company enters into a judicial procedure or in difficulty due to the absence of generational replacement property.
- Cooperative Movement: employees of the company in crisis start a first contact with the cooperation offices of their territory, fundamental step to allow an objective assessment of the concrete possibility of restarting the production activity and develop an industrial plan.
- Business Analysis: the causes of the crisis and corrective measures to overcome them are assessed: the reference market, the possible repositioning, the conditions of investment and employment reorganization, and innovation needs are analyzed.
- Reskilling and Upskilling of Employees: the optimization of available human resources is pursued by providing training programs to build new skills and competences.
- Purchase Plan: a proposal for purchasing business assets is designed: a lease contract with a purchase option is considered preferable because it allows to concentrate in the initial phase in recovering the customers and suppliers and to consolidate.
- Financing project: each worker must contribute to the social capital with a quota provided by their unemployment benefits. The Movement intervenes through:
- Coopfund: mutual fund for development and promotion of cooperation of Legacoop, powered by the payment of 3% of the profits offered by the cooperatives and the residual assets of the cooperatives put into liquidation;
- CFI fund: the fund, set up by the Law Marcora 49/85, intervenes in the cooperative’s share capital (up to doubling the share subscribed by the workers) to be returned within a period of 7-10 years and with long-term financing for investments.
- Fondcooper: incentives managed by the Region for the constitution of cooperatives with a focus on WBO.
- Stress test: Legacoop builds a three year project to evaluate the feasibility of the industrial plan.
Image: Artlining
The concrete outcomes of the WBO include:
- On the territory of Legacoop Emilia Ovest, a dozen of WBOs have been tested, 300 jobs were saved, and 50 million turnover preserved;
- In Emilia-Romagna Region, the WBO concerned 56 new cooperatives, 1200 jobs: 64% in the manufacturing sector, 12% in the construction sector, 16% in the services, and 8% in the retail/wholesale sector.
Image: Methis OfficeLab
Matteo Pellegrini, Institutional Activities and Promotion Manager at Legacoop, believes that “the WBO is an extraordinary experience of courage, determination and collective management. From a crisis situation, they contribute to safeguard jobs, protect the socio-economic fabric and guarantee opportunities for growth and development through a business model based on the centrality of the person, widespread participation and economic democracy. We are convinced that future challenges, especially within the European countries, must be addressed through cooperation, sharing, and cross-contamination. The future is made of real and virtual bridges, not walls."
For further information, contact Dr. Matteo Pellegrini with Legacoop Emilia Ovest on: [email protected] or access the website www.legacoopemiliaovest.coop.
