The path to worker buyouts: Does the UK need its own ‘Marcora Law’?

A worker buyout is part of a business restructuring or conversion process whereby employees purchase an ownership stake in the entire business

Since the 2008 financial crisis, worker buyouts have become an attractive option for employees looking to safeguard their jobs. Worker co-operatives are growing in regions most affected by the crisis with employees taking over their enterprises.

In France and Italy, the phenomenon has been accelerated by a favourable legal framework and different mechanisms that enable employees to raise capital.

This year also marks the 30th anniversary of the Marcora Law, named after the then-minister of trade and industry, Giovanni Marcora. Worker buyouts in Italy took off after the passing of the law, which led to the creation of 257 new employee-owned firms, saving or creating 9,300 jobs. Almost all of these were set up as worker co-operatives, owned and managed by their employees.

A worker buyout is part of a business restructuring or conversion process whereby employees purchase an ownership stake in the entire business. It also often involves the workers’ participation in the running of the firm.

A recent paper published by the European Research Institute on Cooperative and Social Enterprises (EURICSEdefines three types of worker buyouts – labour conflict, employee share ownership plan and negotiated worker buyout.

In the case of labour conflict worker buyouts, a new legal entity, called a newco, is formed during the period of conflict, to engage in the legal and purchasing requirements for buying all or part of the original business.

The employee share ownership model is more common in the UK, Canada and the USA. This model enables employees of the company trust to purchase shares of the target company, usually via an employee stock ownership plan (ESOP). Retiring owners gain tax advantages for selling part or all of their company, while ownership can be shared between employees and other shareholders.

In the USA, the number of employee-owned enterprises reached 7,000 firms with 13.5m employees. However, only a minority of these have a worker co-op structure; the model does not usually include workers’ direct control of the company’s assets or management rights.

Different countries have legal structures that facilitate the buyouts. In Quebec they are called worker shareholder co-operatives, in Spain cooperativas de trabajo and in France Société Coopératve Ouvrières de Production (SCOPs).


In Italy the most common model is the negotiated conversions and business restructuring mechanism.

Gianluca Salvatori, chief executive of Euricse, explains: “The Marcora Law in Italy was instrumental in facilitating employee buyouts, primarily by providing a framework that enables collaboration among all the various stakeholders involved in the process, and also by making available financial support schemes that can help these enterprises navigate the difficult economic conditions they often face.

“The law has also made it easier for the co-operative sector to play a major role in supporting employee buyouts, both through the work of the national federations and through the key role of CFI, a second-tier co-operative with a mandate by the Italian state (under the Marcora Law) to coordinate and facilitate employee buyouts, also acting as a primary institutional investor.”

Once they group into a worker co-operative, employees can begin the process of purchasing part or all of the target company via share capital purchases. According to the Euricse paperthe minimum contribution per worker to the start-up capital for the worker buyout is €4,000. Under the Marcora Law, members of the newco can access technical assistance and know-how, and secure share capital or debt capital financing, through the co-operative movement’s fondo mutualistico (mutualistic fund).

All Italian co-operatives contribute 3% of their yearly net income to the mutualistic fund to help set up new co-operatives.

The state has also created two funds for worker buyouts that help secure employment in times of crisis and convert businesses into co-ops. These are Foncooper, a rotating fund offering low-interest loans controlled by the National Bank of Livorno, and the Special Fund for safeguarding employment levels.

A second-tier co-op, Cooperazione Finanza Imprese (CFI), provides assistance with the buyout process and manages the Special Fund. CFI was created in 1986 and mandated by the Italian state to coordinate and facilitate WBOs within the Legge Marcora framework. The co-op has intervened in 77.43% of the 257 Italian worker buyouts since 1986. It also often works with Italy’s major unions, local authorities and other national and regional organisations that finance and support worker buyouts and new co-operatives.

Co-operatives are also more resilient than other enterprises. Between 2007 and 2013, the survival rate (three years after creation) of Italian businesses was 48.30%, while all Italian industrial co-ops set up after 2007 had a survival rate of 87.16%. The majority were the result of workers’ buyouts supported by CFI.

CFI also collaborates with the three major national unions and the three largest Italian co-operative federations (Legacoop, Confcooperative, AGCI). They offer a variety of services, including business analysis and feasibility studies.

Following a ruling by the European Union, the Marcora Law was found to be in contravention of EU competition rules. The EU argued the Italian state was giving unfair advantage to worker buyout co-operatives since it could invest a 3:1 ratio of capitalisation and start-up funds in relation to workers’ contributions to the buyout.

The law was amended and now limits the state’s portion of funds from the Special Fund to a 1:1 financing ratio with workers’ contributions, which workers must now pay back over the span of seven to 10 years.

The Marcora Law also permits worker buyout co-operatives to take on a financing member for the duration of the investment. This alternative type of co-operative membership comes with some restrictions in order to preserve the mutualistic core of Italian co-ops. It also enables organisations such as CFI, Legacoop’s Coopfond, or Confcooperative’s Fondosviluppo to participate in some decision-making and administration of the co-operatives they fund.

Between 2007 and 2013, CFI invested €84m in new worker buyout co-operatives, with a financial return for the state of €473m, saving and promoting more than 13,000 jobs. The average investment per employee was €13,200.


In France under the 2014 Social and Solidarity Economy Law, employees are granted the right to be informed in case their enterprise is to be taken over. Enterprises with fewer than 250 employees will have to inform them of their intention to sell at least two months in advance.

The law also provides for the creation of transitional co-operative societies (“scop d’amorçage”), enabling the take over of a company under the co-operative model even when employees do not have the majority of capital. They still retain majority in terms of decision-making.

An external investor could own over 50% of the capital of the co-operative society (SCOP), but only for a limited period of seven years. This gives employees the chance to become majority stakeholders eight years on from
the transformation of the enterprise into a co-operative society.

By 2020, the sector will have created or saved 600,000 jobs. The social and solidarity economy accounts for 10% of France’s GDP.

Since the law was passed last year, more than 277 were set up in France, accounting for 70% of the 2,800 jobs created by co-ops.

Often in small and medium enterprises, employees do not have the required capital to acquire the company. The law gives them seven years to become majority shareholders while they continue to retain majority voting rights. The shares owned by other shareholders can be transferred to employees progressively throughout these seven years.

The first to benefit from the new legislation were workers at Delta Meca, a small and medium industrial enterprise in Nantes. Their clients range from off-shore companies to companies in nuclear, aeronautics and food industries.

Since creating the company in 2008, former owners Mireille Bréheret and Christian Caillé have aimed to involve employees in the management of the enterprise. In 2014, they decided to give them the change to actually own the business. They wanted the employees to be “actors” not “spectators”, says Ms Bréheret, who has been in the industry for 20 years. They received support from the regional worker co-operative union.

A contract was drawn up that expressed the employees’ interest in the business and a savings plan to help them get the finance needed. Most employees had already saved enough money during their six years with the enterprise to contribute the initial €5,000 each required.

“For us it’s fundamental to know that in 2020, when we leave the enterprise, it will be protected against a resale. Thanks to the worker co-op model, the work of the founders of the business is respected, the local economy is favoured and speculation is avoided,” says Ms Bréheret.

Last year 20% of the 277 new worker co-ops created in France were the result of takeovers. Patrick Lenancker, president of CG Scop, the national body for worker co-ops in France told Participer: “It is good not to create a co-op too fast. Seven years is enough to guarantee a smooth transition. There’s no doubt that the transitional co-op will become more and more popular across different territories.” He says CG Scop was advising 50 other enterprises looking to become a transitioning co-op, but Delta Meca had been the most rapid.


Figures from the Spanish Confederation of Worker Co-operatives confirm that around 75 worker co-operatives have been set up as a result of worker buyouts, mostly in the wake of the financial crisis. The number could be higher since many enterprises set up as worker co-operatives are not registered with any federation.

Some are old co-operatives such as Gramagraf, a graphic arts worker co-op set up in 1985 or Mol Matric, a worker co-operative that produces automotive tools. These were set up following a conflict between employees and owners.

But the conflict take-over model is not common in Spain. Sometimes owners themselves decide to convert the enterprise in a co-operative to save it from bankruptcy or maintain its legacy after their retirement. At Cuin Factory in Barcelona, the owner encouraged employees to form a worker co-operatives to save the enterprise and became a member himself, paying the same amount as the other worker members – €900.

In other cases workers made redundant form another co-op and maintain some of the clients of the old business. Musicop, set up by 35 employees of the Music School of Mataró in Barcelona, enabled workers to not only save their jobs but also create new ones.

United Kingdom

While in Italy, employees drive the takeover, in the UK it is the owners who normally choose the employee ownership path for succession.

Deb Oxley, director of membership at the Employee Ownership Association, says there is no substantial equivalent in UK for the Marcora Law. “Employees, if they were collectively made redundant, could collectively come together to see if they can raise finances to purchase the business,” she says.

James Wright, Co-operatives UK policy officer, adds: “Legal recognition and incentives for worker co-operatives in Italy have resulted in high levels of co-operative ownership, with all the benefits that come from that.

“In the UK, by contrast, worker co-operatives have tended to emerge organically, with limited and patchy government support for the model. Co-operative Development Scotland, an agency of the Scottish government, for example, is funded to help employees buy their businesses when the owner wants to sell, proving a catalyst for employee buyouts north of the border.”

While worker buyouts seldom result in worker co-operatives, employee-ownership itself is becoming more and more popular among owners looking at ensuring a sustainable future for their business.

“What the UK saw was over-reliance on businesses with external shareholders, which made them particularly vulnerable to the financial crisis. Lots of businesses downsized quickly,” says Ms Oxley.

EOA defines employee ownership as a situation where all employees of a business are offered some form of ownership.

“The ownership has to be substantial – or plan for it to become substantial – ensuring that the collective employee voice has some input in how the organisation is managed and run,” she adds.

Back in 2008, when it was set up, the EOA had 50 members. Now it represents 300 employee-owned enterprises. The main reason behind the growth for employee ownership in the UK is that it is helping owners manage their succession planning. The model is so common among retiring owners because they believe that when employees have a stake, their attitude is different and they will take on various responsibilities.

Ms Oxley adds that employee-owned enterprises have higher levels of production, more profit, are deemed to be more resilient during tough economic times and are also more innovative.

Tax incentives have also helped boost the sector. The Finance Act of 2014 provides two tax incentives for employee owned enterprise. If the majority of a business is owned by an employee ownership trust, the owner is exempted from capital gains tax on a sale of shares to the trustee. A second incentive is that any payments made through that trust to employees in the form of bonus are tax free for up to £3,600 per person per year.

“Those two were at the heart of most important tax changes in a generation for employee ownership and stimulated far more owners to look at employee ownership,” says Ms Oxley.

James Wright thinks co-operative buyouts should also be an easy route for succession. “In the UK, the coalition government introduced tax incentives for owners to sell their businesses to staff through an employee benefit trust,” he says. “These are welcome measures, but they do not provide consistent support for worker buyouts.

“As we stressed in our pre-election call to action, we would like current tax incentives extended to employees using a worker co-op model to buy their business. We would also like a greater level of democratic accountability built into the tax incentives for employee buyouts so the employee owners not only have a financial stake, but also control over their new business.

“Worker co-operative buyouts should be as easy a route for business succession as any other.”

Employee buyouts can take place under an indirect ownership model, where shares in the business are held in a trust on behalf of the employees. This is one of the most popular employee ownership models. This is also the model used by John Lewis.

If they choose a direct ownership model, companies introduce an all-employee share scheme. Employees have shares in their own name, a direct relationship with the company and can benefit from capital gains. One company that uses this model is Gripple in Sheffield, a manufacturing business where all 460 employees own shares in the enterprise.

Many businesses have a hybrid model, meaning that a percentage of equity is held in trust while another in a direct share plan, like in the case of Accord Energy in Scotland.

“When you look at the trust model, the employees are not paying anything – they are not buying shares from owner. The business buys shares, not employees,” says Ms Oxley. “There is no demand on employees for them to donate or spend a minimum amount of money either, it’s voluntary.”

She adds that most employee-owned businesses will finance purchase through own profits or reserves and occasionally look outside for finance. But, she argues, the government could make a difference by establishing a bank to support that. Ms Oxley thinks the sector will continue to grow. “Employee ownership has moved from being a movement to being an economic imperative,” she says.

The employee-owned sector is growing at 9% per annum, and is worth 4% of GDP (£30bn). As the membership body for sector, the EOA has set target for sector to grow 10% of GDP by 2020.

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