Rewarding and retaining key employees is currently a vital business decision given the competitive business market. Other business owners want to pass some value onto family members. The challenge is to do this tax efficiently. Growth/flowering shares are one of several ways to do this.

In general, shares cannot be transferred/issued to family members/employees for no consideration without giving rise to a significant tax charge. The desire to do so is usually triggered by the need;

  • to retain key employees, and,
  • for succession planning

allied with the prospect of substantial capital appreciation in the future. Therefore, the issuing of growth shares should be considered to avoid this tax issue. 

Growth shares can be introduced if the owners of the business are happy to cap the company at its current market value. After this date the increase in some or all of the value of the business(depending on the circumstances) will accrue in the hands of the holders of the growth shares. 

Because it is the future increase in value of the shares, the holders are not liable for income tax/CAT on the issue of the shares. Growth shares act as an incentive for the holders to participate in driving the business on as they ultimately stand to benefit when the value of the company increases. If the owners hold some growth shares themselves, the owners also participate in future value.


A company creates a new class of growth share with a value of €1. 

The shareholders have no rights other than to participate in value above a threshold/hurdle* amount on an exit/sale or distributions on a winding-up of the company.

The shareholders enter into a subscription agreement requiring them to pay the €1 per share. The shares are then fully paid up with no other payments required.

The subscription agreement may contain a vesting schedule. This is a call option which gives the company a right to purchase the unvested shares if a growth shareholder leaves or decides to sell their shares.

The growth shares will hold no value on the granting other than the nominal value paid. Therefore, no income tax or CAT liability will arise on the granting of these shares. There is also no charge to Stamp Duty on the issuing of new shares. The growth shareholders must disclose the acquisition/granting of the growth shares on their individual income tax returns.

On the subsequent sale/exit/liquidation of the company, the original shares held by the owners will be capped at the value which was agreed before the issuing of the growth shares. The growth shares held by the employees/family members/owners as the case may be will participate in the excess above the capped value.

*It is important to note that the valuing of the company must be done professionally to set the threshold/hurdle applicable to the growth shares. There will be no tax implications on the granting of the growth shares providing that an accurate valuation is made of the company at the time of issue. 

Professional advice should be obtained before deciding upon the issuing of growth shares in a company as it is a very technical area. If you have any questions in relation to growth shares, or if you would like to discuss this topic further, please contact a member of the Mazars’ employment tax team below:

Staff Member




Paul Mee

Tax Partner

091 570 137

Emma Collins

Senior Tax Manager

091 570 162


September 2019

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