Government announces changes to company law to boost employee ownership
18 February 2013
The UK Government has announced changes to the Companies Act
2006 to help promote employee ownership following recommendations
made by Field Fisher Waterhouse partner, Graeme Nuttall, in his
independent report on employee ownership.
Changes in how share buy backs can be financed are a step
towards addressing the lack of resources, including funding, to
create and maintain employee ownership. These deregulatory
changes help overcome concerns about the complexity of employee
ownership arrangements.
The Government intends to amend the Companies Act 2006 by
secondary legislation so that the following measures will come into
force during 2013:
In relation to authorising share buy backs these amendments
will:
- allow off-market share buy backs to be authorised by ordinary
(rather than special) resolution; and
- allow for the prior approval of multiple off-market share buy
backs for the purposes of or pursuant to an employees’ share
scheme, to be authorised by a single ordinary resolution.
In relation to financing share buy backs these amendments will:
- allow private limited companies to pay for its own shares in
instalments (where the buy back is for the purposes of or pursuant
to an employees’ share scheme)
- allow for private limited companies to finance buy backs (for
the purposes of or pursuant to an employees’ share scheme) out of
capital, subject to the signing of a solvency statement by the
board of directors and shareholder approval by special
resolution.
- allow for private limited companies to buy back shares using
small amounts of cash (an amount not exceeding the lower of £15,000
or the cash equivalent of 5% of share capital in any financial
year) that does not have to be identified as distributable
reserves.
In relation to treasury shares these amendments will:
- allow all companies limited by shares to hold their own shares
in treasury and to deal with such shares as treasury shares.
Graeme Nuttall, a partner at law firm Field Fisher Waterhouse
said:
"These changes are more wide ranging than originally expected
and are an important start in making employee ownership mainstream
in the UK. They target improvements in the operation of
internal share markets, to support companies using direct employee
share ownership. This is just one of the possible forms of
employee ownership. This announcement shows the Government is
prepared to back its many recent words of support for employee
ownership, with ambitious action."
Nicholas Thompsell, a partner in Field Fisher Waterhouse's
corporate department, added
"The deregulatory changes to the Companies Act recently
announced will be seen as a landmark, not just for employee owned
companies, but for company law generally."
For further information, please
contact:
Paula
Nugent, PR Executive, Field Fisher Waterhouse LLP on 020 7861
4526 or via Paula.Nugent@ffw.com