Onerous rules, which currently restrict companies wishing to buy-back shares held by a departing employee, may have discouraged private companies from offering share incentives schemes to their employees. Proposed deregulatory changes to the share buy-back rules, however, intend to reduce the red-tape surrounding the buy-back of employee-held shares, by implementing the following changes:
- permitting the buy-back to be authorised by an ordinary resolution;
- in respect of employee share schemes only, giving companies the flexibility to make payment for the buy-back in instalments, rather than in one lump sum; and
- authorising companies to hold the bought back shares in treasury, rather than having to cancel them.
For a company, being able to offer shares in to its employees is a useful employee incentive. While this has always been possible, the proposed changes will make the process far more commercially viable for a private company and, therefore, an even more attractive option.