Revenue Releases Important Guidance On Growth Shares
Revenue has issued a guidance note on Growth shares dated July 2021. This note is of relevance in terms of providing equity participation to key management.
What is a Growth Share?Revenue describes growth shares as: “ a special class of ordinary shares that generally have a low or nil value until a certain target or hurdle is reached by the business. The hurdle is specified by the employer when the shares are issued and it can refer to:
- Company performance,
- Individual’s performance, and
- Leaver provisions, among others”.
Valuation Aspects:The guidance note gives an indication of how Revenue perceives growth shares and how they should be valued. They comment that an award of growth shares can be beneficial for:
- Employers as they can reward participants by providing a ‘hope equity’ for short to medium-term growth without diluting current equity
- Employees as they own shares in the company from day one normally free of charge or for a discounted value. Growth shares are also known as ‘hurdle’, ‘ratchets’ or ‘flowering shares’.