Shares for rights – Parliamentary ping pong
We predicted in our blog that shares for rights was going to happen. What we could not predict was the parliamentary game of ping pong between the House of Commons and the House of Lords.
If you have not been following the passage of the Growth and Infrastructure Bill through parliament you may not know that Clause 27 of that Bill contains a proposal to introduce “employee shareholder” status whereby employee shareholders will relinquish certain statutory rights in return for shares in their employer with various tax breaks.
On 22 April 2013 the House of Lords defeated Clause 27 outright with an overwhelming number of peers continuing to voice serious concerns about the new status. On 23 April the House of Commons voted to reintroduce the employee shareholder proposal but with a number of new concessions (explained below). Yesterday (24 April), the Lords passed Clause 27. So what concessions were made to get the legislation through?
Last week the government agreed to make it clear that jobseekers would not be forced to give up unemployment benefits if they refused to apply for, or turned down offers of, employee shareholder jobs. Amendments made this week include a seven-day ‘cooling-off’ period, and companies making an offer of shares for rights will also have to provide a written statement setting out the rights that the employee is giving together with full details of the shares being acquired (details about voting rights, rights to dividends, any restrictions on the shares etc).
Finally, any company proposing to offer employee shareholder status will be required to provide free independent legal advice (and the company will have to meet the costs of that advice) regardless of whether the employee takes up the new employee shareholder status. The legal advice cannot come from any lawyer connected with the company and must cover the terms and effects of the new employment status, including precisely what employment rights will be lost.
Shares for rights will become law on 1 September 2013.