UK Labour party MP Alan Milburn is calling for the amendment of legislation to enable private equity-backed companies to offer all-employee share plans approved by Her Majesty’s Revenue and Customs.
At present, employees working for UK companies owned by private equity firms are, in most cases, unable to participate in such schemes. Where 50 percent of the share capital in a company is held by one or a series of limited partnerships, it falls foul of legislation stating that the company whose shares are used in the plan must not be under the control of any company unless that company is listed – the so-called “control test”. Private equity-backed firms usually fail this test.
Milburn, a former Secretary of State for Health and Chief Secretary to the Treasury, said in a speech made today to ProShare, a London-based organisation dedicated to promoting wider share ownership, that the current situation is “anomalous and must be changed”. He points to figures from the British Venture Capital Association that show more than 1 million people – or 5 percent of the UK private sector workforce – work for firms backed by private equity.
“As a matter of principle,” said Milburn, “I believe it is wrong to deprive over one million private sector employees of the opportunity to participate in tax-approved employee share plans…In the interests of fairness, I hope the government will look at making the necessary amendments to this legislation as quickly as possible. The forthcoming budget [on 22 April 2009] provides an opportunity for the government to signal its intention to do so.”
The call for change in a private equity context forms part of a broader speech demanding the extension of employee share ownership “as part of a…drive to redistribute power and opportunity in British society”.
Milburn is a former adviser to Bridgepoint, the London-based European mid-market private equity firm.