How to decide whether or not to make use of employee-shareholder status
Author: James Jaques
Click on any of the hyperlinks to go to more detailed guidance below.
- Understand the meaning of employee-shareholder status and that specific conditions must be met for an individual to be an employee shareholder.
- Be aware that existing employees have protection from being dismissed or subjected to a detriment for refusing to become an employee shareholder.
- Be aware of which employment rights are given up by employee shareholders and to which employment rights they remain entitled.
- Consider how the company would value shares issued to employee shareholders, to ensure that they receive shares worth at least £2,000.
- Consider the terms of any shares that would be issued to employee shareholders, including terms relating to voting rights and dividend rights.
- Check whether or not shareholder approval would be required for new shares to be issued.
- Be aware that the shares must be fully paid up and understand the implications of this for the company, bearing in mind that the employee shareholder cannot give further consideration.
- Be aware of the procedure that must be followed when agreeing shareholder status, including the requirement for:
- Understand the tax breaks linked to employee-shareholder status and the circumstances in which these will be of benefit to the employee shareholder.
- Consider the effect on the company's reputation as an employer of asking employees to accept employee-shareholder status, or requiring new employees to be employee shareholders.
- Consider whether or not there are other more suitable ways to offer shares to employees, while accessing similar tax advantages.