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Employee Shareholder Agreements

Employee shareholder status is a new employment status, introduced on 1 September 2013. An employee shareholder is an employee who has given up certain employment rights in return for shares in their employer worth at least £2,000.00. The details of the arrangement are recorded in an employee shareholder agreement.

The employer is not allowed to charge the employee for the shares in any way.

If the shares increase in value, employee shareholders receive the benefit of those shares not attracting capital gains tax up to a gain of £100,000.00. There’s no income tax to pay when the shares are sold and there’s only income tax to pay when the shares are granted if the shares are worth more than £2,000.00 at the time of grant.

The downside of becoming an employee shareholder is that the employee gives up certain employment rights such as the right to claim unfair dismissal or redundancy pay and the right to request flexible working. Notice periods for returning early from various types of family friendly leave are also extended from 8 weeks to 16 weeks for employee shareholders. Other statutory rights such as the right not to be unlawfully discriminated against are not affected.

It is because of the loss of some statutory rights that the law requires potential employee shareholders to take independent legal advice at least 7 days before entering into an employee shareholder agreement. This advice works in a similar way to settlement agreements [link to settlement agreement page?], in that it can only be given by certain professionals such as solicitors and barristers. PJH Law has been advising employees on employee shareholder agreements since 2014.

PJH Law’s fees for employee shareholder advice start from £500 per employee, with discounts available if several employees from the same employer require advice at the same time in relation to employee shareholder shares being issued at the same time. By law, the employer has to pay for this advice whether the employee agrees to become an employee shareholder or not.

Whether you’re an employer looking for an adviser to act for a number employees to whom you want to grant employee shareholder status and want to agree legal costs in advance, or you’re an employee who has been offered employee shareholder status and need advice contact us to discuss your requirements.

Call or email us to set up an appointment.