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Business Legal Services
Growth Shares
Boost your benefits package for key employees by offering them Growth Share plans.
Our expert Employee Share Scheme solicitors can explain to you how Growth Shares (often referred to as Hurdle shares of Flowering Shares) work. We’ll help you design, structure and implement a Growth Shares arrangement so that you and your team achieve the maximum benefit of a flexible incentive plan with no statutory requirements (as would be required for EMI options).
Reward top talent and stay ahead of the competition with a Growth Share plan that offers real incentives
We’re experts in employee share schemes and will support you in designing and setting up an appropriate Growth Share arrangement for your specific setup. Our Employee Share Schemes team will:
Advise you as to which share schemes are best for your situation. We can recommend the most suitable arrangements based on your location, business type, stage of growth, and objectives – these may be Growth Shares, Tax Advantaged or non-Tax Advantaged arrangements.
Help you design and implement your share scheme with regards to capital and dividend entitlements, voting rights, and leaver provisions.
Help you define the Hurdle and decide the price your employees will pay for the Growth Shares.
Amend your articles of association to allow for the new class of shares and to include appropriate protection for the company and its existing shareholders.
Draft subscription agreements for participants which include further protection for the company and its existing shareholders and elections under section 431 of the Income Tax (Earnings & Pensions) Act 2003 where appropriate.
Amend any shareholders’ agreements as needed and/or make sure your existing shareholders provide any consents that are required.
Show you how to combine Growth Shares with other types of share schemes, both HMRC tax-advantaged and non-tax advantaged arrangements, including EMI schemes and phantom shares.
Explain to you and help you plan for any impacts under the SEIS or EIS schemes.
Guide you through the Board processes and shareholder resolutions required to set up your Growth Share arrangement and arrange for Companies House filings.
Advise you on HMRC compliance requirements.
Align Growth Share plans with your strategic goals
Working with you to understand your business needs, we will help you answer the following questions when putting a Growth Share plan in place:
- How does a Growth Share arrangement work?
- Will my existing shareholders see the value of their shareholding diluted by the issuance of Growth Shares?
- How does the Hurdle work? How will it be determined?
- Can I tie the Hurdle to business or performance goals?
- How much will my employees/service providers pay for the Growth Shares?
- What happens when an employee leaves?
- Are there any tax advantages and if so, how do they work?
- Can I set a Growth Share arrangement up alongside another employee share scheme or other arrangement?
What are Growth Shares and how to they work?
Growth Share arrangements are popular with high-growth and high-risk companies, like tech start-ups, as a way to attract, reward and retain hard working staff and service providers, often right through to an exit (such as the company being sold). Growth Shares are often used to provide share incentives where Enterprise Management Incentive (EMI) share options cannot be operated.
A Growth Share arrangement is a share acquisition arrangement involving a special class of share which attracts no value until the company reaches a pre-determined valuation (a “Hurdle”), which is normally higher than the current value of the company when the Growth Shares are acquired. The Hurdle is usually designed to minimise the value of the Growth Shares at the time they are acquired, so if the value of the Growth Shares increases over time the Growth Shareholders may receive significant value. If the Growth Shares are properly structured, that increase in value should be treated as a capital gain, which should significantly reduce the taxes payable by participants at the time of an exit in comparison to (for example) a cash or non-tax advantaged share option might.
Who we help
We support a wide range of high-growth, UK-based clients who require support with employee share schemes and other arrangements to retain top talent as they scale their efforts. For many founders that we work with a key area of risk for them is maintaining the balance of retaining talent while ensuring other founders and investors are satisfied with the arrangement, and simultaneously managing cashflow. It’s undoubtedly a juggling act. That’s why many founders seek our help. We can offer the support necessary for you to design and introduce a Growth Share arrangement that suits your business goals and take care of any other concerns that come along the way.
How growth shares can benefit your business
Reward your employees in a tax-efficient way without lots of ongoing admin
While Growth Shares are tax-efficient, they are not ‘tax-advantaged’ so they don’t need clearance from HMRC or to meet specific legal requirements set out in the tax legislation in order to receive tax relief, such as EMI share schemes or other Tax Advantaged share plans.
Preserve your cash-flow
Offering employees equity is a very cash-efficient way to reward them. Unlike bonuses, you don’t need to raise funds or set aside valuable cash-flow to offer them a significant benefit.
Gain a competitive edge
Companies with employee share schemes and other arrangements are proven to be more successful overall than businesses that don’t. Get ahead of the competition (and attract and reward your talent) by setting up a scheme that will attract talent and incentivise them well.
Protect investors and existing shareholders as well as your own stake
When you offer Growth Shares, your employees/service providers will become immediate shareholders. It’s vitally important that you, your existing shareholders and investors are protected from the dilution of your current share value, so that Growth Shareholders only benefit in an uplift in share price after they acquire their shares or after a Hurdle value has been reached. We can show you how to do this, liaise with your shareholders, allay any concerns they may have and amend all your existing agreements with them to reflect the new scheme.
Save money on tax
If your employees will be paying full market value for their shares, they’ll pay no employment income taxes on acquisition of the Growth Shares. They should only pay capital gains tax on any increase in value, and this is paid at a rate that’s less than employment income tax/NICs.
Testimonials
What our clients say
I can’t sing our solicitor’s praises enough: fast, efficient, sensible and supportive. A quick and fair resolution to all queries that we have worked on together and would thoroughly recommend her to any of my contacts.
Samuel B Higgs
Account Director,
Signal Media
Easy to work with, quick responses, quick feedback if changes needed, gets things done. We consider the arrangement very worthwhile for Storelectric and would recommend to others.
Tallat Azad
MD,
Storelectric
I can’t sing our solicitor’s praises enough: fast, efficient, sensible and supportive. A quick and fair resolution to all queries that we have worked on together and would thoroughly recommend her to any of my contacts.
Samuel B Higgs
Account Director,
Signal Media
Easy to work with, quick responses, quick feedback if changes needed, gets things done. We consider the arrangement very worthwhile for Storelectric and would recommend to others.
Tallat Azad
MD,
Storelectric
Why choose Harper James?
We can assist you with strategic analysis of your business and help you understand all the employee share scheme and other arrangements available to you. Beyond your requirements for support with share plans you can also lean on our experienced and integrated team of solicitors across a range of business legal services. From drafting commercial contracts, to data protection audits, corporate governance support and employment policies and procedures. Our aim is to provide legal support for start-ups and high growth businesses quickly, with affordable and transparent legal subscription plans delivered by experienced, partner level solicitors.
Plus, our Employee Share Schemes team has been recruited from top 100 UK law firms or from large international businesses and has advised clients both as external advisors and as in-house counsel. Find out more about the team here:
Experts in growth share plans
Our team can assist you across all areas of employee share schemes, including:
Pricing and service plans
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