Much of the Brexit debate has centred on whether leaving the EU will allow the UK to reduce the burden of business regulation. But what does this mean for employee share schemes?
The mainstream press has been full of arguments about what Brexit might mean for employment law, with a contrast drawn between the freedom for a future UK government to repeal inconvenient EU rules versus a picture of a UK without any workers' rights to speak of.Unsurprisingly, share schemes have barely got a look in.
However, the potential impact of Brexit here is significant. The key change is the possible end of the EU Prospectus Directive for the UK. This would mean that UK organisations cannot rely on the exemption for employee share schemes to offer shares to employees across the EU. Instead, UK organisations would suddenly face the same higher regulatory hurdles as do US organisations trying to issue shares to employees in the EU. Hopefully, a future UK government would prioritise solving this problem post-Brexit, but in the ensuing mass of competing priorities, nothing can be guaranteed.
Not all of the possible changes are bad news for benefits professionals; any wholesale repeal of EU employment rights like discrimination, fixed-term worker protection, agency worker rules, et cetera, could make share plan design more straightforward. However, despite the loud noises of the two campaigns, the prospects of this happening are slim.
Any post-Brexit arrangements with the EU are likely to oblige the UK to comply with all or most EU employment law (as, for example, Norway and Switzerland are obliged to). It would be very surprising if the EU gave the UK unfettered access to the common market without imposing these conditions.
Further, even if the UK did somehow secure some concessions, it is highly unlikely that any future government would rush to roll back established protections. No mainstream political party will want to campaign on a promise to 'End Paid Maternity Leave Now' or 'Make Discrimination Lawful'.
Overall, like all things Brexit, the future picture for share schemes is clouded with uncertainty but, unexpectedly, there is a real prospect of more, rather than less, regulatory difficulty if the out campaign succeeds.
Anne Croft is a consultant and Raoul Parekh is an associate at GQ Employment Law
