The plans introduced by the Department of Business Innovation and Skills (BIS) has said companies with employee ownership, that issue shares directly to their employees will find it easier to buy back these shares when an employee leaves. The company will then be able to reissue these shares more easily when new employees join.
BIS has said these deregulatory changes will reduce the administrative burden of share buy backs allowing employers to avoid the situation where companies promoting employee ownership can become predominately owned by former employees or others outside the company.
Employee Ownership Association (EOA) chief executive Iain Hasdell, said: "I welcome the enactment of this Statutory Instrument and the Government's commitment to looking at further refinements to it in the future.
"The instrument will improve the workings of internal share markets and it will reduce costs. The enactment sends an important signal to the business community and professional advisers that Government is serious about promoting employee ownership."
Employment relations and consumer minister Jo Swinson said: "Hundreds of businesses will benefit from the introduction of reforms that make direct employee ownership easier and simpler for both employers and employees.
"Evidence shows that employee owned companies can be more profitable, create more jobs and were more resilient during the economic downturn."
She added: "We are committed to making direct employee ownership more attractive, cutting red tape for companies, and promoting new and more responsible ways of running a business."