Growth shares have become popular as a strategic instrument within the UK startup landscape. Their unique attributes offer a fresh opportunity for both companies and stakeholders to flourish. Here are some of the key points to bear in mind when exploring growth shares, and how to navigate through them confidently and effectively.
What are Growth Shares?
Growth shares are a special financial instrument that empower shareholders to enjoy the rewards of a company's future growth. The realization of this growth hinges on surpassing a specific valuation hurdle. It’s this achievement when the rights associated with the growth ‘flower’, that triggers the transformation of growth shares into valuable assets.
A Tool for Maturer Startups
Growth shares find a niche within mature UK companies that have outgrown the limitations of government share schemes like EMI and CSOP. While these schemes are often popular choices because of their tax benefits for earlier-stage startups (or those with humbler financials), the same advantages don't extend to growth shares. But, what you’ll find is that growth shares have their own advantages.
They come with their own Tax Treatment
The magic of growth shares doesn’t actually lie in their tax benefits during acquisition, unlike their counterparts in government share schemes. Their beauty lies in their tax treatment during sale. When growth shares are sold, they are subject to capital gains tax rather than income tax. This distinctive tax treatment makes them a more favourable choice for both companies and employees.
They are adaptable with existing Models
One of the best things about growth share schemes is their adaptability. They can seamlessly coexist with share option plans, offering a pragmatic solution for companies that have surpassed EMI or CSOP limits. This synergy means that even when startups have outgrown conventional routes, the opportunity for adding more firepower to your equity distribution, is still open for business.
The UK startup world is evolving, and as growth shares carve out a new frontier, companies and stakeholders alike have the opportunity to shape a dynamic new equity future. Here at WE.VESTR, we believe in growth shares and democratising equity rewards for all. Feel free to connect with us if you wanted to find out how else you can use our platform to empower your company and your employees today.