Growth Shares definition

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Employment-related securities tax charges and common transactions in which they arise—checklist

Employment-related securities tax charges and common transactions in which they arise—checklist The checklists below highlight key chargeable events that can result in employment-related securities income tax and National Insurance contributions (NICs) charges, namely: • the acquisition of employment-related securities by an employee or director • events during an employee or director's ownership of employment-related securities • the disposal of employment-related securities by an employee or director other than to associated person, and • the acquisition and disposal of unapproved employment-related securities options This note also contains a table setting out guidance on some common transactions where employment-related securities tax charges can arise. Where income tax charges arise in relation to employment-related securities for which the employing company is required to account to HMRC via PAYE, note that further income tax and NICs charges can also arise if the employee or director fails to reimburse the employer by 5 July following the end of the tax year in which the original charge arose (for more details see Practice Note: Notional payments...

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Practical steps involved in implementing growth shares

Practical steps involved in implementing growth shares What are growth shares and are they appropriate? Growth shares, also known as value shares or hurdle shares, are a special class of shares that have restricted rights. These rights are designed to allow employees only to participate in post-acquisition increases in the value of the company. For more detailed explanation of the key features of growth shares and when they are normally introduced by a company, see Practice Note: Growth shares (value shares). Key features of growth shares Growth shares are specially constituted and classified under the articles of association of the company as a separate class of shares from the existing shares in the company. They will be issued to selected employees and will be subject to the provisions of the articles of association and also either to the subscription agreement that each participating employee will be asked to sign or the option documentation that they enter into, where the employee acquires their growth shares via an option over...

Why do companies use share schemes?

Why do companies use share schemes? Why not just reward staff with cash? It is often a simpler, less burdensome way to reward and incentivise employees. This Practice Note analyses the advantages and disadvantages of shares schemes as a general concept. For further details on the advantages and disadvantages of each individual type of scheme, see Practice Note: The advantages and disadvantages of each share incentive arrangement. This Practice Note details: • why do companies implement share schemes? • what are the types of share schemes? • the advantages of share schemes (from a company and employee perspective) • the disadvantages of share schemes (from a company and employee perspective), and • use of share schemes Why do companies implement share schemes for their employees? There are numerous reasons why companies choose to implement employee share schemes and many of these depend on the size of the company and its specific objectives. Some common reasons for companies utilising share schemes include, but are not limited to: • recruiting,...

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Growth shares term sheet

Growth shares term sheet [INSERT NAME OF COMPANY] growth SHARES This term sheet summarises a proposal to incentivise key employees of [insert name of company] (referred to below as the ‘Company’) by allowing those employees to subscribe for a new class of shares in the Company (Growth Shares). All issues raised in this document are for discussion purposes and each should be considered carefully before implementation. 1 Overview Under the terms of the proposal, participants will subscribe directly for Growth Shares. The Growth Shares will have rights which are designed to allow employees to participate only in post-acquisition increases in the value of the Company in the event of an IPO or liquidation, or where more than [Insert percentage]% of the Company's ordinary shares are sold (in each case, referred to in this note as an ‘Exit’). When an Exit occurs, the Growth Shares will carry an entitlement to share in part of the Exit consideration, provided that the purchase price paid to shareholders of the Company...

Subscription agreement for growth shares

Subscription agreement for growth shares This Agreement is made on [insert date of execution of the share option agreement] Parties 1 [insert name of Company whose shares are being subscribed for] incorporated and registered in [insert country] under number [insert company registration number] whose registered office is [insert registered office] (Company). 2 [insert name of Subscriber] of [insert address of Subscriber] (Subscriber). BACKGROUND The Subscriber has agreed to subscribe for [insert number of growth shares to be subscribed for, and class of the growth shares] shares of £[insert nominal value of the growth shares] each in the capital of the Company subject to and in accordance with the terms and conditions of this Agreement. The parties agree: Terms 1 Definitions and interpretation 1.1 In this Agreement, unless the context otherwise requires the following expressions shall have the following meanings: Articles • means the articles of association of the Company, as amended from time to time; Completion • means completion of the matters described in this Agreement...

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If an employee acquires growth shares and enters a section 431 election there should be no further tax charge under the restricted securities regime. But if the growth shares' hurdle is subsequently reduced, would any other income tax charging provisions be triggered?

If an employee acquires growth shares and enters a section 431 election there should be no further tax charge under the restricted securities regime. But if the growth shares' hurdle is subsequently reduced, would any other income tax charging provisions be triggered? This Q&A assumes that the proposed reduction of the hurdle applying to the growth shares is not part of a pre-ordained series of steps or a tax avoidance scheme (for example, where it was planned from the outset to award the shares with a high hurdle and then reduce the hurdle to give a benefit to employees). In such a case, HMRC could effectively seek to argue that the employment-related securities legislation is not engaged, and that the employees are simply taxable to general earnings, following the example of PA Holdings Ltd v Revenue and Customs Commissioners and UBS AG v Revenue and Customs Commissioners. Where section 431 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) election has been validly signed by the...

Is it possible to grant enterprise management incentives share options over growth shares?

Is it possible to grant enterprise management incentives share options over growth shares? Enterprise management incentives (EMI) share options can be granted over growth shares as long as those shares meet the requirements of paragraph 35 of Part 5 of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003. This requires that the shares are fully paid up, form part of the ordinary share capital and are non-redeemable shares. In addition, all other EMI company and employee eligibility criteria must be satisfied at the time of