The Government has amended company law in an attempt to increase the number of firms offering direct employee ownership schemes.
UK employee owned companies have a turnover of £30bn a year and employ more than 130,000 people. Ministers say these firms are more productive, profitable and more resilient to economic shocks than other businesses.
The new rules mean that a company with employee ownership that issues shares directly to its employees will find it easier to buy back those shares when an employee leaves. It will then be able to reissue those shares when new employees join.
The changes will reduce the administrative burden of share buybacks and enable companies to avoid situations where they become owned predominantly by former employees and others outside the company.
It’s hoped the changes will bring employee ownership to the attention of a wider audience.
Ministers say employee ownership in this context involves the employees of a company having a significant and meaningful stake in that company. To be meaningful, the employees’ stake should go beyond mere financial participation and underpin organisational structures that ensure employee engagement.
combined direct and indirect ownership - a combination of individual and collective share ownership.
The measures to improve the system have been introduced through changes to the Companies Act 2006. They impose no additional costs on businesses, but should offer more flexibility and choice.
Please contact Jon Alvarez if you would like more information about the issues raised in this article.