Government response to the Nuttall Review
On 30 October 2012, the Department for Business, Innovation and Skills (BIS) issued a response to the Nuttall Review of employee ownership.
The response is divided into the three major themes established by the Nuttall Review: raising awareness of employee ownership, increasing the resources available to support employee ownership and reducing the complexity of employee ownership. Additionally, the report sets out the detail of the Government’s response to each of the 28 recommendations of the Nuttall Review and details what action the government will take in respect of each the recommendations.
The report also summarises the results of a call for evidence on introducing a “right to request” employee ownership. A key question posed in the call for evidence, and raised by the Nuttall Review, is whether the Government should introduce a statutory ‘Right to Request’, or rather a voluntary arrangement with no sanction or legal force behind ‘Requests’ made by employees. More respondents were against the idea of introducing such a statutory ‘Right to Request’ than those who supported it. The most commonly cited reason was associated with the regulatory burden upon business and employers that would be risked by a statutory right.
Share buybacks: BIS consultation on implementation of Nuttall Review
On 30 October 2012, alongside its formal response to the Nuttall Review (see above), BIS also published a consultation paper relating to Recommendation V of the Nuttall Review: “The Department for Business, Innovation and Skills should consult upon improving the operation of internal share markets to support companies using direct share ownership, including holding private company shares in treasury and facilitating share buy backs.” The consultation proposes a number of simplifications to the share buyback regime for private companies, and invites views on the extent to which simplification is possible whilst minimising any risk from removing regulatory protection or benefits that the current regime are designed to ensure.
The consultation proposed a number of amendments to Part 18 of the Companies Act 2006, and sought comments on whether:
- an off-market purchase of own shares should require the authority of only an ordinary resolution of shareholders;
- payment for a buy-back of own shares should be allowed to be made in instalments;
- companies should be able to use a wider range of sources to fund the buy-back of own shares; and
- private companies should be able to hold shares in treasury ?
BIS has also published a draft of the Companies Act 2006 (Amendment of Part 18) Regulations 2013, which indicates how the government would implement the legislative changes proposed in the consultation.
The consultation also sought views on whether the current company law restrictions on the source of funds for a buyback of shares are overly restrictive in the context of a buyback for the purposes of an employees’ share scheme, although no proposals are made for a change to the law in this area. Our own response is available on our website.
BIS intends to publish its response to the consultation by the end of February 2013.