For The Growth Shares Model
- Private company currently worth £10 million with five shareholders who are resolved to drive the company forward towards high growth in order to realise the company’s potential.
- Operating in a specialised management consultancy field with a dynamic set of products and services that have unlimited potential in the UK and worldwide.
- Existing shareholders want to preserve for themselves the existing Whole Company Value at the date of the commencement of the employee share scheme AND going forward.
- Resolved to involve the whole workforce of 140 employees in a growth shares model as the impetus for the company to grow in the UK and overseas.
- Reclassify the existing ordinary share capital into a new preference share capital to replace the existing ordinary share capital.
- Value the company at the £10 million Whole Company Value and freeze the £10 million Whole Company Value into the new preference shares.
- Create new ordinary shares as the Growth Shares, allocated 80% to the existing shareholders and 20% to the new employee shareholders. so that all (existing shareholders and new shareholders) benefit from the growth.
- On a sale of the company, say for £50 million, the first £10 million is paid to the preference shareholders while the remaining £40 million is paid to the ordinary shareholders (the Growth Shareholders).
Interesting Scheme Features
- The Growth Shares, i.e. the ordinary shares, grow from zero value, to attract all future growth following the reclassification, with ALL gain as capital gain.
- The employee share scheme is Enterprise Management Incentives which has the special form of Entrepreneurs Relief that was specifically created by statute for Enterprise Management Incentives.
- For all Enterprise Management Incentives, the special form of Entrepreneurs Relief delivers a 10% capital gains tax rate on the capital gain, provided a period of at least one year has elapsed from the date of grant to the date of sale. However, when linked to the Growth Shares Model, the 10% capital gains tax rate applies to virtually all the sale proceeds as the base cost of the shares is no more than a very low nominal value, say £0.0001 per share.