The Department for Business, Innovation & Skills (BIS) has published model documentation and guidance to help an existing business move to employee ownership according to Northampton accountants Harris & Co.
Employee ownership is where all employees have a significant and meaningful stake in a business. It should not be confused with the employee shareholder employment status, where employees can become part-owners of their business without changing their employment status.
The model documentation, designed to be used by business owners and those who advise them, is a significant step towards meeting the 2012 Nuttall Review recommendation to develop ‘off-the-shelf’ toolkits to support employee ownership. It includes templates which can be used by a company with employee ownership for its Constitution and Articles of Association. It also features templates for the Trust Deed for an Employee’s Share Trust (with accompanying notes) and Articles of Association of the Trustee Company. The documentation will need to be tailored to fit a business’s particular needs and this may require input from professional advisors.
The accompanying guidance explains the model documentation and some of the key options for businesses to consider in moving to employee ownership, these being direct and indirect employee ownership; individual or corporate trustees; a trustee company and an employee’s council.
HMRC have also, so far, published two guidance notes on tax issues relating to employee ownership. The first, ”Employee Share Trust – introduction to tax issues” covers the main tax issues associated with a trust-based form of employee ownership, namely capital gains tax, inheritance tax and income tax. The second, “Purchase of own shares by non-quoted companies – tax implications for employees selling shares” highlights the main tax issues that may arise where employees – including employees leaving a company – sell shares to their employer under arrangements facilitated by regulations for the purchase of own shares by a non-quoted company.