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Government relaxes share buy back rules to boost employee ownership


Changes to the current share buy back rules have been unveiled in a bid to boost direct employee ownership and reduce red tape.


Under new rules outlined by the Department for Business, Innovation and Skills (BIS), companies with employee ownership that issue shares directly to their employees will find it easier to buy back these shares when an employee leaves.


The company will then be able to reissue these shares more easily when new employees join.


In addition, share buy backs connected with an employee share scheme will be eligible for approval in advance, and there will also be a greater range of options available for financing buy backs.


The changes follow recommendations set out in the Nuttall Review of July 2012, which concluded that the provisions on the buy back of shares were ‘overly burdensome.’


It is hoped the modifications to the rules will prevent the situation where companies promoting employee ownership could become predominantly owned by former employees or others outside the company.


Employment Relations and Consumer Minister Jo Swinson said: ‘Hundreds of businesses will benefit from the introduction of reforms that make direct employee ownership easier and simpler for both employers and employees.


‘Evidence shows that employee owned companies can be more profitable, create more jobs and were more resilient during the economic downturn. We are committed to making direct employee ownership more attractive, cutting red tape for companies, and promoting new and more responsible ways of running a business’.