Growth, Hurdle & Flowering Shares
Holders of growth, hurdle or flowering shares entitles them with a defined benefit in the future growth and success of a business.
Growth Shares, Hurdle Shares and Flowering Shares
At Herrington Carmichael our specialist corporate incentive scheme solicitors are able to explain and assist in the design, structure and implementation of growth shares for your business.
Growth Shares typically amplify in value with the company’s success, hurdle shares trigger additional benefits upon achieving performance targets and flowering shares escalate rewards tied to predefined milestones in the business.
These shares are often issued to key employees or executives, as a way to align their interests with the long-term success of the company creating motivated in employees and high retention rates.
The shares may have specific periods attached to them, such as a vesting period or performance targets that are required to be achieved.
Our recent experience has often seen companies link the growth shares to exit events, so that the shares come into play on certain exit events, such as a sale of the business, entitling the holders of the shares to receiver a portion of the proceeds of the sale.
If you have any questions regarding growth shares or other employee incentive schemes, please get in touch and we would be more than happy to see how we may be able to assist your business.
FAQs
Which companies can use growth shares?
Only private limited companies can use growth shares as it is a requirement that the company has at lease two classes of shares. Growth shares are a special class of shares issued with the purpose of allowing the growth share holders to benefit from any increase in the value of the company.
Clearly, growth shares are more beneficial for companies with aggressive growth plans as they serve to incentivise key employees to deliver this growth. This is because the employees will see no benefit if the value of the company remains the same, however, for any the future growth the company enjoys, the employees will benefit in direct proportion to the growth.
What are the benefits of growth shares?
For companies, growth shares can be combined with EMI schemes and this is beneficial for tax planning purposes. Further, the issue of shares serves to foster an ownership mentality for the participating key employees and they employees also benefit from there being no income tax payable on the shares.
Which companies can use hurdle shares?
Hurdle shares can be employed by various companies, particularly those seeking to align employee incentives with specific performance goals. This approach is common in start-ups, private firms and even establish corporations aiming to motivate and reward key individuals based on predefined achievements.
What are the benefits of hurdle shares?
Hurdle shares offer companies a mechanism to align employee interests with corporate goals, fostering motivation and dedication. They tie compensation directly to performance, encouraging individuals to contribute to the company’s success and meet specific targets. This can enhance overall productivity and align employees with the long-term success of the business.
Which companies can use flowering shares?
Any company can technically use flowering shares, but they shine most for high-growth startups, pre-IPO companies, and those transforming. These types benefit from the long-term focus and incentive flowering shares offer to attract and retain talented employees.
What are the benefits of flowering shares?
With flowering shares, companies are able to attract and retain talent with ownership potential at low cost, aligning interests with performance-based rewards. Employees then gain equity stake and share in company success, motivated by clear goals and potential tax advantages.
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