Growth Shares meaning

In this issue: UK, EU and international regulators and bodies Authorisations, approvals and oversight Accountability, culture and social governance Insurance regulation Prudential standards Operational resilience Financial crime and sanctions Consumer protection Complaints, redress and claims handling Investigations, enforcement and discipline Capital markets regulation Dispute resolution for financial services lawyers Derivatives regulation Sustainable finance and ESG Banks and mutuals MiFID II Consumer credit, mortgages and home finance Regulation of insurance FSMA-regulated pensions activity Payment services and systems Fintech and cryptoassets LexTalk® Financial Services: a Lexis®Nexis community Financial Services Enforcement Database Daily and weekly news alerts Intraday news alerts New and updated content Dates for your diary Latest Q&As UK, EU and international regulators and bodies FCA and HoL FSRC exchange on a new strategy to strengthen competitiveness and growth in the UK's financial services sector On...

In this issue Q&As Useful information Weekly highlights from other practice areas Q&As New Q&A When setting up growth shares in a subsidiary where value is expected to be realised through a sale to the parent under a put option, must the put’s terms appear in the issuer’s articles, or can they sit in the subscription agreements instead? This Q&A examines a scenario where the growth shareholder benefits from a put allowing them to require a purchase at a defined time for a price that disregards any minority discount. It considers whether those put terms need to be embedded in the issuing company’s articles of association, drafted so they advantage any hypothetical buyer or holder of the shares, to manage the risk of an income tax charge under the employment-related securities rules where disposal occurs for more than market value on exercise of the put... Useful information Rough tax justice—finally?...

New Financial report On 5 September 2024, New Financial reported that UK pension funds’ exposure to British shares in 2024 has slipped to 4.4%, down from 6.1% a year earlier. This is below the global average of 10.1%, and only Canada, Norway and the Netherlands commit a smaller portion to their domestic equities. The London-based think tank produced the study in collaboration with the Capital Markets Industry Taskforce, a group that works to enhance and promote the growth of capital markets in the UK. Over the last 25 years, UK pension funds have progressively reduced their holdings of domestic shares. Corporate defined benefit plans now allocate just 1.4% to UK equities, while public-sector schemes put around 9% into the market, the report noted...

FORTHCOMING CHANGE relating to the modernisation of stamp taxes on shares framework: From 2027, stamp duty and SDRT will be replaced by a single, self-assessed tax on securities—the securities transfer charge (STC)—which will be paid and reported via a new online portal. The STC’s features will largely reflect the proposals for that tax set out in the 2023 consultation. Finance Bill 2026 (FB 2026) provides a power, commencing on Royal Assent, to introduce secondary legislation so taxpayers can pilot the digital service by self-assessing their stamp taxes on securities liabilities and submitting transactions electronically. For more on the modernisation of stamp taxes on securities, see: News Analyses: Budget 2025—Tax analysis—Stamp and transfer taxes Tax update spring 2025—Stamp taxes on shares modernisation Tax update spring 2025—Tax analysis—Stamp and transfer taxes TAMD 2023—Stamp taxes on shares modernisation TAMD 2023—consultation—stamp taxes on shares Tax Administration and Maintenance Day—27 April 2023—Stamp and transfer taxes...

Leaver provisions and different types of scheme When putting together share plan rules or an option or award agreement, an employer will usually want to spell out what becomes of the relevant option or award if the employee’s employment ends. Any clause addressing this point is commonly called a ‘leaver provision’. For most share incentive arrangements, such leaver terms will be contained in the master plan rules and/or the recipient’s specific award paperwork. By contrast, where the award’s structure makes the individual a shareholder from day one, for example under a growth share arrangement, the leaver mechanics may instead be set out in the company’s articles of association, so as to address any obligation on the employee shareholder to transfer their shares on departure from the company or, as appropriate, the wider group. Where a share award is granted under a statutory tax‑advantaged share scheme, the company must also ensure the scheme’s leaver provisions meet the legislative conditions that apply to that particular type of plan (see: Leaver requirements...

The need to value employee shares When contemplating offering shares to employees, whether directly and/or via a share plan, employer companies and existing shareholders must reflect on what the shares are worth for several reasons, including: determining how many shares are needed to meet their objectives (valuing existing shares can indicate a need to sub-divide current shares and/or establish a new class) assessing the tax that may arise on acquisition and on any later chargeable events (for example, for PAYE purposes and/or to enable an employee and the company to decide whether to make an election in relation to restricted shares), particularly in respect of: convertible securities restricted securities securities with artificially depressed or enhanced market values securities acquired for less than market value, and securities disposed of for more than market value providing information to an employee acquiring restricted shares and to the employing company that is considering entering...

FORTHCOMING CHANGE: On 26 November 2025, as part of Budget 2025, the government announced changes due to commence on 6 April 2026. The EMI gross assets threshold will increase from £30 million to £120 million, the upper limit on full‑time equivalent employees will rise from 250 to 500, and the overall cap on the value of unexercised EMI options that a company or group may have outstanding at any one time will go from £3 million to £6 million. In addition, the maximum EMI exercise period will be extended from 10 to 15 years, and existing EMI options can be amended to adopt this longer exercise period without losing tax advantages, provided such amendments are consistent with the legislation that will form part of Finance Bill 2025–26. Furthermore, with effect from April 2027, the obligation to notify HMRC of the grant of EMI options for them to take effect as qualifying options will be removed. This change will be legislated in Finance Bill 2026–27. These measures were confirmed as...

This Agreement is entered into on [ insert date of execution of the share option agreement ] Parties [ insert name of Company whose shares are being subscribed for ], a company incorporated and registered in [ insert country ] with number [ insert company registration number ], with its registered office at [ insert registered office ] (Company). [ insert name of Subscriber ], of [ insert address of Subscriber ] (Subscriber). BACKGROUND The Subscriber has agreed to subscribe for [ insert number of growth shares to be subscribed for, and class of the growth shares ] shares, each with a nominal value of £[ insert nominal value of the growth shares ], in the capital of the Company, on and subject to the terms and conditions of this Agreement...

1 Model Articles 1.1 Save to the extent that these Articles amend, disapply or conflict with them, the Model Articles govern the Company. Subject to any such amendments, disapplications or conflicts, the Model Articles, together with these Articles, comprise the Company’s articles of association, to the exclusion of any other articles or regulations contained in any statute, statutory instrument or other subordinate legislation. 1.2 The following provisions of the Model Articles shall have no effect in relation to the Company: 11(2) (quorum for directors’ meetings), 12 (chairing of directors’ meetings), 13 (casting vote), 14(1)–(5) (conflicts of interest), 21 (all shares to be fully paid up), 26(5) (share transfers), 30(5)–(7) (procedure for declaring dividends), 39 (chairing general meetings), 42 (voting: general), 44(2) (poll votes), 50 (no right to inspect accounts and other records), 51 (provision for employees on cessation of business), 52 (indemnity) and 53 (insurance)...

Recognised growth market exemption from stamp duty and SDRT The recognised growth market exemption from stamp duty and SDRT covers securities admitted to trading on a recognised growth market, provided they are not listed on any market. Although people often say AIM shares are ‘listed on AIM’ or ‘AIM listed’, they are in fact unlisted; it is therefore better to describe them as ‘AIM traded shares’ or simply ‘AIM shares’. They are classed as unlisted because they are not included in the UK official list. Under section 1005(3) of the Income Tax Act 2007 (ITA 2007), a security admitted to trading on a UK recognised stock exchange counts as ‘listed’ only if it appears on the UK official list. Furthermore, section 99A(3) of the Finance Act 1986 confirms that the meaning of ‘listed’ in ITA 2007, s 1005(3)–(5) also applies to the references to ‘listed’ within the recognised growth market exemption from stamp duty and SDRT...

This Q&A proceeds on the basis that intended lowering of the hurdle attached to the growth shares is not one element of a pre‑arranged sequence of steps or a tax avoidance arrangement (for instance, where the plan from the outset was to grant the shares with a high hurdle and later reduce that hurdle to confer a benefit on employees). In that scenario, HMRC might effectively contend that the employment‑related securities rules are not engaged, and that employees are instead taxable to general earnings, by reference to the cases of PA Holdings Ltd v Revenue and Customs Commissioners and UBS AG v Revenue and Customs Commissioners...