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What Is An Employee Shareholder Agreement?

Since 1 September 2013 employers have been able to offer employees a new type of employment status.  An employee becomes an “Employee Shareholder” by being given shares totalling no less than £2000 in the company. There is no set upper value. These shares also benefit from additional tax breaks as no Tax or National Insurance is paid on the first £2000 of shares (providing the employee has no material interest in the business). Employee Shareholders can also benefit from capital gains exemption on any gains made on the disposal of up to 50,000 shares.

For an employee to become an employee shareholder they must meet a certain set of conditions:

  • Both the individual and the company must agree that the individual is to become an employee shareholder
  • The company must give the individual fully paid up shares in the company worth at least £2000
  • The individual must not pay for the shares in any way
  • The company must give the individual a written statement of the particulars relating to their status as an employee shareholder
  • The individual must get advice from an independent legal adviser regarding the terms laid out in the written statement. The company must pay for this advice whether the individual accepts the employee shareholder agreement or not.
  • The individual cannot accept the agreement until seven days has passed from the receipt of the independent advice.
  • Employees are expected to give up some statutory employment rights such as redundancy pay, the right to request flexible working and unfair dismissal protection.  However, it may be that the company will try to replicate these rights in the agreement.

Such issues need careful consideration before you agree to them, and this is where Analysis Legal comes in. We can offer you clear, unbiased advice on the employment law implications of the Agreement. If you are offered an employee shareholder agreement and do not wish to accept it, then the company has to accept that. You cannot be forced into accepting it, and are well within your rights to complain to an employment tribunal if you suffer any detriment or are subject to unfair dismissal as a result of your decision not to accept it.