Employee shareholder status
Employee shareholder status

The following Employment guidance note provides comprehensive and up to date legal information covering:

  • Employee shareholder status
  • Requirements for a legally binding employee shareholder agreement
  • Statement of particulars
  • Particulars of employee shareholder status
  • Rights attaching to employee shares
  • The award of employee shares—company law considerations
  • Ceasing to be a shareholder or employee
  • Effect of a TUPE transfer
  • Continuity of employment
  • Advising the prospective employee shareholder
  • more

IMPORTANT NOTE: The ability to offer tax-favoured employee shareholder shares or ESS (commonly used in private equity company arrangements) has been removed. The government announced in the Autumn Statement 2016, the removal of the following reliefs in relation to ESS:

  1. the income tax and National Insurance contributions (NICs) relief which applied to the first £2,000 worth of ESS received by an individual

  2. the capital gains tax (CGT) exemption in respect of all or a portion of the ESS, and

  3. the provision which ensured that, when a company buys ESS back from an employee shareholder, the consideration is not a distribution in the shareholder’s hands

The changes related to any employer shareholder agreements made on or after 1 December 2016. However, any individual who received independent advice regarding entering into an employer shareholder agreement before 23 November 2016 still had the opportunity to enter into the agreement before 1 December 2016 and still receive the beneficial income and CGT tax advantages. Similarly, any individual who received independent advice on 23 November 2016 before 1.30pm still had the opportunity to receive the tax advantages provided they entered into the employee shareholder agreement on or before 1 December 2016..

The changes do not affect ESS agreements entered into prior to the above dates.

The decision to abolish ESS followed evidence