In February 2013, the Department for Business, Innovation and Skills published its response to comments received on its October 2012 consultation paper on the proposed relaxations to the regime which currently applies when a company acquires its own shares (a “share buy back”). A revised draft of the regulations amending the relevant parts of the Companies Act 2006 has now been published. The amendments are designed to help the implementation of the Government’s proposal to allow companies to grant shares to their employees in exchange for the employees relinquishing certain employment rights. Employees are sometimes reluctant to accept shares or share options, particularly in private limited companies, as it is difficult for them to find a buyer for the shares and realise any value for the shares. The intention is that the simplification of the buy back process will make it easier for companies to buy back shares from employees and perhaps encourage employees to participate in share schemes. The amendments include provisions to allow private limited companies to:
– buy back shares using small amounts of cash (not exceeding the lower of £15,000 or 5% of share capital in any financial year) where authorised to do so by the articles of association;
– authorise in advance multiple share buy backs contracts, where the buy back is related to an employees’ share scheme; and
– finance buy backs connected to an employees’ share scheme out of capital, subject to certain approvals and procedures.
The proposed amendments are intended to come into force on 30 April 2013.
These proposed changes are interesting and certainly may make employees’ share schemes and share buy backs more attractive to certain clients.
Emma Cameron advises frequently on share buy backs and employees’ share schemes.
