Growth shares—practical examples and comparisons with options

Produced in partnership with Jeremy Glover (Share Schemes)

Practice notes

Growth shares—practical examples and comparisons with options

Produced in partnership with Jeremy Glover (Share Schemes)

Practice notes

What are growth shares?

Growth shares, also known as value shares or hurdle shares, are a specially constituted class of shares which have restricted rights. These rights are designed to allow the growth shareholder to participate only in post-acquisition increases in the value of the company on a capital return to shareholders once a pre-determined value hurdle has been achieved. They therefore tend to have a similar economic effect to an option with a market value or premium exercise price.

For more details on key features of growth shares and the circumstances in which they may be an appropriate structure for a company to incentivise its employees, see Practice Note: Growth shares (value shares).

In order to appreciate the returns and the tax treatment applicable to growth shares, it is interesting to compare growth shares with enterprise management incentives (EMI) options and unapproved options. For general information to EMI options, see Practice Note: Introduction to enterprise management incentives (EMI) schemes. For background on unapproved options, see Practice Note: Unapproved share options.

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Jeremy Glover (Share Schemes)

Jeremy is a senior incentives lawyer who has over 18 years' experience advising businesses on their employee and executive incentives and share plans. Jeremy's practice focuses on the field of remuneration, executive pay, employee share plans and management buyouts. Jeremy advises a broad range of clients including multinationals, quoted companies, privately owned companies (family, owner-managed businesses, venture capital backed and private equity backed). He also provides specialist expert advice to other professional advisers such as accountants, tax advisers and remuneration consultants for their clients. Jeremy has worked in private practice and in-house and enjoys advising clients using the benefit of both perspectives. Jeremy used to head up the incentives practices at Reed Smith LLP, Stephenson Harwood LLP and the Entrepreneurial Group at EY in London. Jeremy is now a senior consultant to a number of law and accounting firms including Reed Smith LLP, PWT Advice LLP and Jurit LLP. Jeremy is also the CEO of start-up 6S Infinity LLP which, inter alia, provides legal documentation services. Jeremy has a first class LLB from Exeter University and a first class MBA from Cass Business School.

Jurisdiction(s):

United Kingdom

Key definition:

Growth Shares definition

What does Growth Shares mean?

Growth shares, also sometimes referred to as value shares or hurdle shares, are a type of employee share incentive arrangement which involves a specially constituted class of shares which have restricted rights.

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