What happens to growth shares during an exit event?

If your company is going through an exit event or is planning for one in the future, it’s important to understand the implications around growth shares, and how you can create a growth share scheme that’s aligned with the company’s exit goals. 

When an exit event occurs, a company’s articles of association define what happens to any vested (conditionality has been removed) growth shares. Typically, vested growth shares are sold, but if a company has bespoke articles, the outcome can differ. 

However, the board has total discretion as to how to treat unvested (still conditional) growth shares. The board can choose to vest any unvested shares so recipients can benefit from the full upside of their shareholding, which is a great way to incentivise people to work towards an exit. 

Or the board can allow recipients to only keep their vested growth shares and defer the balance of any unvested growth shares. Or they can decide to do something in the middle and vest a certain amount of unvested growth shares for recipients. 

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.'