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‘Shares for rights’ gains Lords’ approval

Plans to introduce a controversial new ‘shares for rights’ scheme have now been approved by the House of Lords.

The new employee-shareholder status, which is contained within the Growth and Infrastructure Bill, will allow employees to give up some of their statutory employment rights – including protection from unfair dismissal, the right to a redundancy payment and flexible working rights – in return for shares in the company of between £2,000 and £50,000, with any gains being exempt from capital gains tax.

Following heated debate, and a double rejection by the Lords, a number of amendments have been introduced to the original plans, with the aim of protecting employees. These include a new requirement that employees receive a statement detailing the employment rights they would stand to lose under the scheme, as well as information on the rights and restrictions attached to their shares.

A seven-day cooling off period has also been added to the legislation, and employees considering entering into the scheme must also receive advice from an independent party, at the expense of the employer. In addition, employees who choose not to sign up to the scheme will be offered protection.

Some employers and legal groups have expressed concerns over the measures, with many warning that small businesses are unlikely to welcome the tax and red tape implications.