The government has announced new rules which are expected to change the burdensome share buy-back rules currently in place.

The changes, announced by employment relations and consumer minister Jo Swinson, should in effect reduce the administrative burden of share buy-backs allowing companies to avoid the situation where companies promoting employee ownership can become predominately owned by former employees or others outside the company.

Under the new rules 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 reissue these shares more easily when new employees join.

Through the new regulations, shareholders in any company would be allowed to approve off-market (ie not through a regulated investment exchange) share buy-backs by an ordinary resolution. Currently share buy-backs require a three quarters approval. Under these regulations the approval threshold will be lowered to a simple majority.

Share buy backs connected with an employee share scheme will also be eligible for approval in advance. Companies will now be able to approve all future buy-backs over a specific period of time through shareholder resolution rather than on a case by case basis.

The changes also allow a greater range of options for financing buy backs will be available: payments by instalments, a simplified regime for buy-backs out of capital; and using small amounts of cash.

In addition, through the new rules, more companies will be able to hold shares bought back 'in treasury' so that they may be issued to new employees or share scheme joiners. This company share 'storage facility' will reduce the administrative burden and costs associated with creating new shares every time a new employee joins.

The changes announced today to the Companies Act 2006 implement one of the recommendations of the 2012 Nuttall Review of employee ownership - which found that company law provisions on the buy backs of company's own shares were overly burdensome and recommended the removal of barriers and disincentives to direct employee ownership.

Swinson also announced that Thursday 4 July 2013 will be the first national Employee Ownership Day, which is to be marked so as to raise awareness of the Employee Ownership sector at both national and local level across the UK and to illustrate the achievements and progress made since last year's Employee Ownership Summit.

'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. 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.

'I hope these changes, alongside the announcement of an Employee Ownership Day on 4 July, will raise awareness of the benefits of employee owned companies and lead to an increase in the number of direct employee owned firms across the UK,' said Swinson.