The Department of Business, Innovation and Skills published the final report from the Nuttall Review of Employee Ownership on 4 July 2012 (available here).  Graeme Nuttall was asked by the Government in February 2012 to examine how to promote employee ownership in the private sector.  The Nuttall Review examines the beneficial effects of employee ownership on business performance, economic resilience and employee well-being and engagement, set outs the barriers to the creation and uptake of employee ownership arrangements and makes recommendations on how these barriers can be addressed to promote employee ownership further in the British economy.

Nuttall Review recommendations

The Nuttall Review identifies three broad categories of obstacles to employee ownership:

  • a lack of awareness of the concept of employee ownership;
  • a lack of resources available to support employee ownership, including financial resources; and
  • perceived or actual legal, tax and other regulatory complexities of employee ownership. 

A number of the recommendations to the Government in the Nuttall Review relate to increasing awareness of employee ownership and increasing resources available to promote employee ownership.  The recommendations summarised below are those which relate to reducing the complexity of employee ownership.  The Government should:

  • issue a call for evidence on the introduction of a statutory right for employees to request consideration of an employee ownership proposal.  As part of this the Nuttall Review covers how such a right to request could be structured.  It discusses redress where there is a failure to comply but says this should be minimal and in keeping with a light touch approach and suggests the introduction of a voluntary Code of Practice on employee ownership;
  • develop simple employee ownership toolkits (using an employee benefit trust (EBT) model) which would cover the main legal, tax and regulatory considerations and include off-the-shelf templates for an EBT deed, articles of association and related ancillary documentation;
  • exempt EBTs (including existing EBTs) from the 125 year perpetuity period required under legislation, to enable perpetual ownership of shares in employee owned companies by EBTs;
  • consult on measures to improve the operation of internal share markets to support companies which use direct share ownership, eg use of treasury shares by private companies and facilitating share buy backs;
  • take into account the regulatory impact on employee owned companies as part of its consultations on future changes to employment law, to ensure that employee owned companies do not suffer unintended burdens because of their structure; and
  • establish an independent Institute to provide information and guidance on employee ownership.  

The Nuttall Review also considered whether there should be new legal entities for employee owned companies and for collective ownership of shares on behalf of employees but concluded that there are other priorities at the moment.  It has, therefore, recommended that the independent Institute should provide evidence to the Government on whether a new legal entity for either or both employee owned companies or collective ownership is needed, three years after the implementation of the recommendation on template documents.

The Nuttall Review refers to reviewing tax legislation.  It does not specifically refer to the draconian anti-avoidance legislation recently introduced by the Government, known as "disguised remuneration".  This would seem to us to be one of the most important simplifications.  There must be a straightforward exemption for all EBTs promoting employee ownership from this legislation. 

Government response

The Government has a stated aim to promote employee ownership further in the economy.  This is reflected in the Foreword to the Nuttall Review in which Norman Lamb, Minister for Employment Relations, Consumer and Postal Affairs, states that he wants "this to be the decade of wider employee ownership" and that his goal "is to shift employee ownership into the mainstream of corporate Britain". 

The Government has announced that it:

  • will establish an independent Institute for Employee Ownership;
  • has launched a call for evidence on the "Right to Request" employee ownership proposal, which closes on 7 September 2012 (the call for evidence is available here); and
  • will produce new off-the-shelf DIY packs to help companies adopt employee ownership business models.   

The Government will formally respond to the Nuttall Review in Autumn 2012. 


There is no doubt that with the level of Government support there will be developments in this area, although it will be a fine line to tread ensuring that there is enough flexibility and not too much additional legislation or prescription.