Employee shareholders—general corporate and private equity considerations
Employee shareholders—general corporate and private equity considerations

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

  • Employee shareholders—general corporate and private equity considerations
  • Creation of employee shareholder status: allotment and issue
  • Pre-allotment considerations
  • Authority to allot
  • Issuing employee shares as fully-paid
  • Rights attaching to the employee shares
  • Financial assistance
  • Additional private equity considerations

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

  1. the income tax and NICs relief which applies to the first £2,000 worth of employee shareholder shares received by an individual

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

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

The changes relate 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 1.30 pm, still had the opportunity to receive the tax advantages provided they enter 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