Manufacturing and Succession – Growth Shares

Growth shares are a type of equity share specifically designed to enable certain key employees to share in a company's future growth.

Unlike traditional shares, growth shares offer a stake in the future increase in the company's value, not its current value.
Some key features include:

• Valuation: Growth shares are typically issued at a nominal amount initially because they only have value if the company grows. The company must be formally valued before implementing a growth share scheme.
• Rights: Growth shares often carry limited or no voting rights and might not provide a right to dividends until certain performance conditions are met. They will carry a right to capital, but only above a certain "hurdle value", which is more than the company's value at the point of issue.
• Conditions: They can be subject to performance conditions and may vest over time or upon achieving specific milestones.
  Employee share options: They can be issued via a share option scheme, such as an EMI plan (if the company qualifies for EMI).

Growth shares can be an effective tool in succession planning.

They help to retain and motivate key employees, align their interests with those of the company, and provide flexibility in financial and equity planning.

These factors can contribute to a smoother and more successful leadership transition within the company.