Understanding when you should defer growth shares and what happens when you do.
When you defer shares, you effectively convert them from their current share class to a deferred share class that has no value or voting rights. The most common reason for deferring shares on Vestd is when the conditions of growth shares haven’t been met.
Growth share schemes likely include time and/or performance-based conditions that the recipient has to meet in order for their shares to vest, and in turn become unconditional.
But in the event that some or all of the conditions aren’t met, you can defer some or all of the shares for that particular vesting period.
Let’s say the recipient has a performance-based condition where they must meet 100% of their sales target each month for all of their growth shares to vest. If one month they meet 70% of their target, you will vest 70% of the growth shares for that month (vesting period) and defer the rest.
If the conditions are time-based, you may need to defer some shares when a recipient leaves the company. For example, if the growth shares vest once a year and the recipient leaves 6 months into the year, you would vest 50% and defer 50%.
Of course, you can only defer shares if it’s in line with the original agreement (e.g. if ‘achieve sales target’ isn’t a condition in the agreement, you cannot defer the shares because the recipient didn’t achieve said target).
It’s always worth reviewing the original agreement so you’re sure of the conditions the recipient needs to meet, and that the amount of shares you’re deferring is consistent with the agreement.
Deferring shares is irreversible, so please always exercise caution when deferring shares on Vestd.
Once you complete the deferral process, we will automatically update Companies House and email the recipient letting them know how many shares have been deferred.
Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice'.