Growth Share Plan (GSP)

The Growth Share Plan (“GSP”) is a tax efficient share arrangement that can help a company engage and motivate key personnel to meet and exceed corporate objectives.

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About the Growth Share Plan

The idea behind growth shares is that participants acquire a special class of shares that have particular “hurdles” attached – for example, they will only be worth anything once the Company has achieved a certain value, which is usually set at a much higher point than the company’s current value.

Participants in the GSP would be expected to pay the full market value for the shares when acquired, but this value would be comparatively low, because of the hurdles attached. The shares only obtain a significant value once hurdles are met. Any gain on disposal should be treated as capital gains.

Where the hurdles relate to individual or group performance over a period, the acquisition of the shares can be used to motivate and retain staff.

ESS for Private Companies Book — Employee Share Schemes for Private Companies

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Benefits of the Growth Share Plan

Promotes retention of key employees
Can include non-employee participants, for example contractors
Motives participants to work beyond short-term goals
Gains treated at the favourable capital gains tax rate
Allows company to define share value based on exit values where appropriate
Focuses participants on achieving and exceeding corporate objectives

Watch a recorded webinar
Employee Share Schemes for Private Companies Webinar

How we can help

At RM2, we believe in taking a consultative approach to building share plans and finding out precisely what our clients are looking to achieve. This approach helps us to deliver a professional and effective service, helping clients meet their goals and plan for the future. Our highly experienced team are well positioned to guide your company through every stage of the share scheme process, including:

1. Strategic review

The design will flow from your objectives, so the more precise you are the better. What is your business plan, and what you need from your employees to execute this plan successfully? Do you want to focus people on an exit? Do you want to reward all employees as a team? Do you have just one key recruit in mind? We will ask you lots of questions to tease out your objectives.

2. Plan design

At this stage, you will need to decide on any rights and conditions to attach to shares, such as performance conditions and leaver provisions. Don’t worry: we’ll recommend features for you. A key decision is the amount of equity you want to set aside for share schemes. We’ll help you with an indicative valuation and some equity modelling.

3. Shareholder resolutions

Once the design and modelling are complete, we will work through your company structure and identify what changes need to be approved by shareholders. We will then prepare resolutions to be passed and work with you to obtain approval from shareholders.

4. Articles of association

The core of a share scheme is the set of rights and restrictions attaching to shares, and these are set out in the articles of association. We will prepare amendments so that these rights and restrictions strike the right balance between delivering value to employees and protecting the interests of other shareholders.

5. Share valuations

The share valuation can have an enormous impact on how employees are motivated and the tax treatment of the shares. We will prepare a valuation and agree this with HMRC. Just as importantly, we can help you understand the meaning and implications of that valuation, and how you should adapt your strategy according to the result.

6. Employee communications

Communicating information about your share scheme to all the participants is vital its success. As standard, we will provide all clients with easy-to-follow notes explaining your scheme. We can provide further help and guidance on how to effectively promote your scheme if you wish.

7. Share Plan administration

Once your scheme is implemented it will need to be administered to ensure it remains compliant. We have the most experienced Operations team for share schemes in the UK, so you can be confident that your scheme is in capable hands.

8. Ongoing support

We try to be as proactive as possible when it comes to monitoring your scheme’s performance. We can help improve any equity-based arrangements. You and we are always learning.

Employee Share Scheme Aftercare

Once an employee share scheme is setup, it is vital that it is administered effectively to ensure that:

your share plans remain compliant
all relevant documents are filed online with HMRC
the intended tax benefits are achieved
employees are kept aware of their awards and the benefits
your share plans remain relevant

What our clients say

Paul Craddock
Managing Director, Sencon UK Ltd
I chose RM2 because of their obvious expertise and experience in share schemes and throughout the process, it was apparent that I was dealing with people that really knew their business. The entire process was smooth and simple and my new directors now have share options that I trust will help motivate and retain them.

Next steps

We have successfully designed, implemented and administered over 1,150 share plans across a range of sectors, so you can rest assured your plan will be in the best possible hands.

If you would like to find out more about how the Growth Share Plan can help your business, why not call a member of our team directly on 0208 949 5522, download a fact sheet or send an email to enquiries@rm2.co.uk.