The Employee Shareholder Scheme

14th January 2014
The Employee Shareholder Scheme image

The Employee Shareholder Scheme


Under the Growth and Infrastructure Act 2013 (Commencement Number 3 and Savings) Order 2013 the new employment status of employee shareholder was introduced with effect from the 1st September 2013.

Under the scheme, employee shareholders waive certain rights such as the right not to be unfairly dismissed, the right to a statutory redundant payment etc (subject to some exceptions and limitation) in return for at least £2,000.00 of shares in the employer’s company.

Existing employees who refuse to become employee shareholders are protected from dismissal or other detriment but job applicants who are refuse an employee shareholder job because they do not want to join the scheme will not be afforded protection.

Employees must receive independent legal advice before joining the scheme, and the company must meet the costs of the advice.

Interest in the Scheme

There was a consultation on the employee shareholder status in October 2012, but the results showed that only a very small number of respondents anticipated using the proposed status.

Daven Naghen, head of the Maples Employment Team, does not expect interest in the scheme to increase significantly:-

“From an employee’s prospective they are unlikely to be interested in such a scheme as they will not want to lose certain employment rights (e.g. right not to be unfairly dismissed) and they will need to weigh up the value of any potential compensation they are waiving against the benefit they will gain from the shares.

Employers are likely to be put off by having to pay for the employee to take independent legal advice even where the employee decides later not to proceed with the scheme, as well as the cost of share valuations and any buy-back requirements.

There is however some enthusiasm for the scheme with start-ups and fast growing companies.

Possible tax-savings are likely to be of great interest to senior employees, particularly those in companies with good growth potential.

I remain sceptical as to whether interest in the scheme will significantly increase.”

How does the Scheme propose to help running a Business?

The intention of the scheme is to provide a flexible workforce for small and medium sized businesses.  Although it cannot be imposed on existing employees, it could be imposed on future employees.  This means that smaller businesses can recruit knowing that ordinary unfair dismissal claims cannot be brought against them, giving these businesses greatly flexibility in re-structuring and greater certainty of termination costs.

Implications in terms of Tax

The most significant tax relief under the scheme is that shares acquired in consideration of an employee shareholder agreement are exempt from capital gains tax, representing a potential tax saving of up to 28% of the growth in the value of the shares from acquisition until disposal. The relief only applies if at the time of acquisition the market value of the shares is not greater than £50,000.00.

Income tax may arise on acquisition of the shares by the employee shareholder but only to the extent that the market value of the shares on acquisition exceeds £2,000.00.

HMRC has helpfully indicated that it will agree a market valuation of shares with a company before such a scheme is commenced.

Obviously advice should be taken from a tax specialist or financial advisor on these points. Do you need Advice?

If you are a business considering entering into such a scheme, or you are an employee that has been offered such a scheme, then please contact Daven Naghan for advice and guidance on 01775 722261 or email or write to Dav at 23 New Road Spalding Lincolnshire PE11 1DH

Dementia Friends image

Dementia Friends

Maples Solicitors are proud to announce that they have now joined to become Dementia Friends which is an Alzheimer’s Society initiative.

The private client department of Maples Solicitors prepare Wills and Lasting Powers of Attorney on a regular basis and this often involves dealing with clients who are suffering from dementia. The private client team pride themselves on spending as much time as is necessary to assist all of their clients, but those suffering from dementia often require additional assistance and time to ensure that they have fully understood the legal documentation that they are creating. The private client department are regularly complimented on the way they deal with such clients, whether this be explaining things to them in a clear and uncomplicated manner, spending time with them or putting them at ease.

It is a misconception that anyone suffering from dementia cannot make a Will or Lasting Power of Attorney. Only if someone lacks sufficient mental capacity are they unable to make such a document. It is therefore vitally important upon any diagnosis of dementia that legal advice is taken as soon as possible to make sure that your affairs are in order so that it is easier for your family to deal with your affairs if you are unable to do so yourself.

To become Dementia Friends, Maples Solicitors have pledged to develop their understanding of dementia and continue assisting clients suffering from dementia with their legal affairs in a respectful, friendly and efficient way that is not daunting making the process as easy as possible.

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Gemma Mayer LLB

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Anita Toal LLB BA

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James Turner BA

James Turner was extremely helpful with our buying process. Everything went smoothly. We are very happy with the level of professionalism demonstrated by the office. Highly recommended solicitors. Will definitely do business with them again.

Daven Naghen LLB

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Faye Blair LLB

Faye was excellent, sensitive and acted very well to the time constraints we faced. Great service and dealt with compassion at such sad times made the process less painful very professional.

Jamie Dobbs GCILEx

Over the last forty years I have cause to deal with many law firms both in a personal and professional capacity, including some ‘top’ London Companies. In all of those dealings I have never found anyone as proactive and so willing to offer help and advice as Jamie Dobbs. During the last two years Jamie guided my parents through the completion of Lasting Powers of Attorney. Helped myself with the use of the LPA and recently dealing with Probate and Estate Administration following their death.

Mike Pepper MA

Mike Pepper gave us excellent advice. He was always most helpful and accommodating giving lucid explanations every step of the way. Thank you Mike.

Donna Sandison FCILEx

Donna has been helpful and professional every step of the way during the process. Always on hand to answer any queries and totally professional and friendly at all times.