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Following approvals from both UK houses of parliament, the UK Government's changes to the Companies Act 2006 to help promote employee ownership come into effect as of today. This follows the recommendations made by Fieldfisher partner, Graeme Nuttall, in his independent report on employee ownership - The Nuttall Review.
The Government has amended the Companies Act 2006 by statutory instrument so that the following measures come into effect as of today:
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.
The amendments to company law are designed to encourage employee ownership and reduce barriers to companies operating direct employee share ownership schemes.
Graeme Nuttall, partner at Field Fisher Waterhouse LLP and author of the Nuttall Review, said:
"These significant changes in company law will bring employee ownership to the attention of a wider audience. The changes will provide many companies with a less expensive and simpler way to run an internal share market for employees' share schemes. As a Nuttall Review recommendation they will always be linked to the broader goal of making employee ownership a widespread feature of the UK economy."
Employee Ownership Association (EOA) Chief Executive Iain Hasdell said:
“I welcome the enactment of this Statutory Instrument and the Government’s commitment to looking at further refinements to it in the future. The Instrument will improve the workings of internal share markets and it will reduce costs. The enactment sends an important signal to the business community and professional advisers that Government is serious about promoting employee ownership.”
A press release from the Department for Business, Innovation & Skills is also available.
For further press information please contact:
Ibrahim Kamara, PR Manager, Field Fisher Waterhouse LLP on 020 7861 4120
Notes to Editor
The Nuttall Review
'Sharing Success: The Nuttall Review of Employee Ownership' (July 2012) (the "Nuttall Review") sets out a framework to promote employee ownership in the UK. It was written by Graeme Nuttall, partner Field Fisher Waterhouse LLP, and launched on 4 July 2012 at the Deputy Prime Minister's Summit on Employee Ownership.
The employee ownership business model has significant benefits, as shown by research and success stories. But it is an under-used and under-appreciated business model. The Nuttall Review was commissioned by the Government as an independent appraisal of why this is and what can be done about it. There is more information on the background to the Nuttall Review and a copy of it at: http://www.bis.gov.uk/policies/business-law/employee-ownership.
The Government's formal response to the Nuttall Review came on 30 October 2012. An action plan to knock down the barriers preventing more British businesses from becoming employee-owned including an Implementation Group on Employee Ownership was confirmed by Department for Business, Innovation & Skills Minister Jo Swinson. All 28 recommendations in the Nuttall Review were wholly or partly supported by the Government as part of its policy on employee ownership.
The UK Government’s 2013 Budget Report confirmed support for employee ownership as a business model and welcomed work by the Implementation Group on Employee Ownership to take forward the recommendations of the Nuttall Review.
The Nuttall Review changes to the Companies Act 2006 are implemented under sections 737 and 1290 of the Companies Act 2006 by The Companies Act 2006 (Amendment of Part 18) Regulations 2013 (SI 2013/999 )with effect from 30 April 2013.
Fieldfisher
Fieldfisher is a European law firm providing commercial solutions across a range of industry sectors. We have a particular focus on companies that are highly regulated and those with intellectual property and technology driven business models.
The firm has over 150 partners, 240 other lawyers and nearly 300 support staff across offices in Brussels, Dusseldorf, Hamburg, Paris, London, Munich, Manchester and Palo Alto.
Our main areas of practice are corporate, IP, technology and regulatory law. We also have leading expertise in areas such as banking and finance, financial services, real estate, dispute resolution, personal injury and medical negligence. Our sector focus is on Energy & Natural Resources, Financial Institutions, Hotels, Retail & Leisure, Life Sciences & Healthcare and Technology, Media & Telecoms.
We have an international client base that includes listed and unlisted companies, multinationals, financial institutions, professional partnerships, trade associations and Government departments.
Website: http://www.ffw.com/
Employee Ownership Association
The Employee Ownership Association is the voice of co-owned business in the UK – a network of over a hundred companies with significant employee ownership and a sector of the economy worth over £30 billion annually.
Website: http://employeeownership.co.uk/