Jurisdiction(s):
United Kingdom

Key definition

Growth Shares definition

What does Growth Shares mean? Growth shares are a bespoke class of shares used in management and employee equity incentives. They entitle holders to participate only in the company’s value above an agreed hurdle (often a threshold share price or equity value), with limited or no rights to existing value. Also known as value shares or hurdle shares, the term is descriptive market usage and is not defined by statute or case law. Key features include: rights set out in the articles or share terms; restricted or nil dividends until the hurdle is met; limited voting; vesting and leaver provisions; and a defined...

Growth Share Management Incentives for UK Listed Groups: Subsidiary Structures, Valuation, Realisation, Investor Governance and Tax Risks

Published by a LexisNexis Share Incentives expert

Practice notes

What are growth shares?

Growth shares are ordinary shares that only participate in a company’s capital value once a defined value hurdle is met. That hurdle may equal the company’s market value at the subscription date, but more often is set at a premium to the initial equity value. After the hurdle is cleared, growth shares can participate on any chosen basis—frequently ranking pari passu with other ordinary shares on value created over the hurdle—and may include terms that affect their initial valuation, such as:

catch-up provisions
ratchets
similar features

Returns on growth shares can be capped if desired, although many companies avoid a cap to preserve management’s incentive. For further information, see Practice Note: Growth shares (value shares).

Why issue growth shares?

The primary aim is to drive participants to create future value while ring-fencing current value for existing shareholders. Growth shares suit senior management incentives in particular, and situations where companies expect a steep growth curve...

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Chris Barnes

KPMG LLP

Chris is a partner at KPMG, with 20 years’ experience advising on Reward and Employment Tax issues for a mixture of privately owned and listed businesses. He has a particular focus on working with high-growth businesses across private equity and also smaller listed businesses (in particular AIM and FTSE Small Cap).Chris leads the Reward practice at KPMG, where he and his team advise businesses on all aspects of the reward cycle – from strategic design through to implementation, tax, valuation and accounting....

Web page updated on 21/05/2026

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