Growth shares for employees

For many years now companies have been implementing ‘growth share’ schemes. Under these schemes employees acquire shares which have little if any current value when they are acquired but if particular company value hurdles are met (often on an exit) the shares can become very valuable and the gains are subject to the favourable capital gains tax regime. ‘Growth’ shares is just one name for these arrangements.

Private equity-owned companies are great users of these schemes but they can be established even by mature unleveraged companies. Quoted companies can also use them with a scheme in a subsidiary company where the growth shares are (when valuable) exchanged for parent company shares issued to employees. They can also be accompanied by arrangements which give entrepreneurs’ relief or even work with the new arrangements where employees give up employment rights for free shares (so...