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The new regulations simplify the rules governing how a private company can buyback its shares and how it can hold these shares as "treasury shares". Part of the aim of these changes is to encourage companies to offer equity to employees. The new rules include the following:
The new regulations should help to encourage smaller companies to utilise employee equity arrangements, without the need to use the more complex buyback procedures or an employee benefit trust. The ability to hold shares in treasury will also ease the process of issuing equity to new employees.
The changes stem from proposals for wider employee share ownership resulting from the Nutall review in 2012, which more controversially recommended allowing employees to take shares with tax benefits in return for giving up employment rights. Employee-owned companies can be more profitable, create more jobs and have largely been relatively resilient during the economic downturn. By easing the process of buying back shares from departing employees, companies may be more likely to increase employee equity to incentivise staff.
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