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Employee Shareholder Status (Shares for Rights)

At a seminar in London on 25th November, an officer of HMRC announced that the Dept. of BIS had advised HMRC, and HMRC had accepted, that existing shares could, in future, be acquired as ‘Employee Shareholder Status’ under the rules described at Chapter 18A.

If correct, this would be a significant change making it very much easier for companies to structure such acquisitions using, for example, existing shares held in an employees’ trust. The problem is that this would be expressly contrary to s 205A Employment Rights Act 1996 (ERA), which refers to the issue of new shares fully-paid, and the authority cited (published minutes of a meeting of the HMRC Employee Share Schemes Forum on 23rd September 2014) does not support such a change: they refer simply to companies being able to use shares issued out of treasury.

HMRC have since confirmed that BIS has agreed this point and that this will be the subject of an HMRC bulletin to be published in the New Year. There is apparently to be no re-issued guidance from BIS and no change made to the Employment Rights Act.