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Department for Business Innovation and Skills opens consultation

David Reid
26th Oct 2012

The Department for Business Innovation and Skills (‘BIS’) opens consultation on employee owner status.

In a previous article we reported the government’s announcement to allow employers to offer employees shares instead of their full suite of employment law rights, through new ‘employee owner’ contracts.

 

A consultation paper which sets out the ‘rights for shares’ proposal in further detail has now opened and will close on 8 November 2012. The Treasury will be consulting on the tax implications of the proposal separately.

 

One issue highlighted is the right of the employer to include a clause in the employee owner contract which requires the employee owner to surrender the shares when he/she leaves employment, is dismissed or is made redundant. Under the proposal, upon surrender, the employer would have to buy back the shares at their ‘unrestricted market value’. It is anticipated that this, if introduced, is likely to lead to disputes over valuation. Given that the Employment Tribunal is unlikely to provide the appropriate forum for resolution of such disputes, this could result in parties having to enter into costly litigation to settle such matters.

 

We will keep you updated with any developments.

 

The full consultation can be found here.

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