There are a number of conditions that must be met for someone to become an employee shareholder – whether as a new hire or an existing employee. The employer and the individual share responsibility for meeting these conditions. Both must agree that the individual will be an employee shareholder. The employer must give the individual fully paid up shares in the employer’s company or parent company and they must be worth at least £2,000. The individual must receive a written statement of particulars of the status of employee shareholder and be advised by a relevant independent adviser on the terms and effect of the written statement – for which the company is required to pay, whether or not the individual ultimately agrees to become an employee shareholder.
Employee shareholder shares benefit from income and capital gains tax exemptions. Employee shareholder status is potentially attractive to individuals keen to have tax-efficient equity participation in their employer. It has to date proved to be especially popular amongst private equity houses and venture capitalists wishing to incentivise management teams.
Our recent experience includes:
- advising over 200 senior employees of a well-known insurance company upon the implications of agreeing to become employee shareholders
- advising members of the senior management team of an internationally renowned department store on the terms and effect of their respective written statements of particulars for becoming employee shareholders
- assisting the board of directors of a renewable energy company to offer employee shareholder status to key employees and providing a detailed analysis of the relevant law
How Fox & Partners can help:
We provide employers and employees with advice on employee shareholder status. We have a track record of delivering independent legal advice to prospective employee shareholders on the terms and effect of the documents they are required to sign. This typically involves:
- checking the draft written statement required to be given to each employee shareholder under section 205A of the Employment Rights Act 1996
- checking the employee shareholder agreement for each employee shareholder
- advising employee shareholders upon the terms and effect of the relevant documentation in ‘town hall’ meetings and dealing with questions
- providing each employee shareholder with a letter setting out a summary of our advice on the terms and effect of the proposed agreement
- delivering adviser certificates to the employer for each employee shareholder confirming that we have advised our clients upon the terms and effect of the documents they are requested to sign.
Please call us on 020 7618 2400