Practical steps involved in implementing growth shares
Practical steps involved in implementing growth shares

The following Share Incentives guidance note provides comprehensive and up to date legal information covering:

  • Practical steps involved in implementing growth shares
  • What are growth shares and are they appropriate?
  • Key features of growth shares
  • Determining the terms of the growth shares
  • Valuation and modelling
  • Accounting
  • Drafting and documentation
  • First operation of the growth shares
  • Reporting requirements

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 them. See Practice Note: Growth shares and EMI schemes in particular regarding when it can be appropriate for growth shares to be granted via an enterprise management incentives (EMI) option.

The growth shares should be structured to have all their terms set out in the articles of association in order to minimise the risk of an income tax