If you’re building a growth-stage business, chances are you’ve thought about giving your team a stake in the company. After all, it’s widely accepted that shared ownership drives higher performance, stronger loyalty, and long-term alignment.

But while the ‘why’ is relatively straightforward, the ‘how’ can feel like a legal rabbit hole. It’s a puzzle of which to go for:

• EMI
• Options
• Ordinary shares
• Growth shares
• Hurdle rates
• Buybacks

For many founders, that’s where the wheels fall off.

In this guide, we’ll break down the key differences between growth shares and ordinary shares and look at how to choose the right structure for your team – and your stage of growth.

Why share equity at all?

Let’s start with the big picture.

A substantial body of research (including studies from HM Treasury) shows that companies with share schemes can be over twice as productive as those without.

When people feel like owners, they don’t just show up – they step up. A slice of the pie increases buy-in, improves retention, and creates a deeper connection to long-term company goals.

And in a world where talent has a roving eye and culture matters, that kind of alignment gives you serious competitive muscle.

Ordinary shares: the basics

Ordinary shares are the standard, full-fat form of equity. Founders and early investors typically hold them. If you hold ordinary shares, you hold an actual share in the company.

As such, these shares come with full rights to vote, to receive dividends, and to benefit from an exit (such as when the business is sold).

This is great for co-founders, early builders, or long-term hires. But there are a few things to consider:

• Dilution: ordinary shares dilute everyone else’s stake immediately, even before any value is created.
• Tax: if you give them at a discount (or for free), the recipient may face an upfront income tax bill based on the value they receive.
• Risk: if someone leaves early or just doesn’t do their fair share, reclaiming the shares isn’t always straightforward unless you’ve set up clear leaver provisions.

Growth shares: equity for value yet to be created

Growth shares are a clever alternative that only become valuable if the company grows beyond a certain point. This point is known as the ‘hurdle’.

Imagine your business is currently valued at two million pounds. You issue growth shares with a hurdle of two million. That means the recipient only benefits if the company grows beyond that – say to five million. They get a slice of that extra three million of value, not the value that existed before they joined.

That makes them perfect for rewarding people for what they help to build, rather than what already exists.

Some key benefits:

• Alignment: the shares are only worth something if the company succeeds.
• Tax-efficiency: if structured correctly, growth shares can deliver gains taxed as capital rather than income.
• Flexibility: they can be issued to employees, contractors, advisors – with fewer restrictions than EMI schemes (another popular scheme).

They’re particularly attractive to start-ups and scale-ups that want to reward performance without giving away current equity.

EMI vs growth shares: is it either/or?

Not necessarily. The Enterprise Management Incentive (EMI) scheme is one of the most generous and flexible share option schemes in the world – but not every business qualifies. EMI only applies to companies with fewer than 250 full-time employees, under £30 million in assets, and operating in eligible sectors.

If you qualify, EMI should absolutely be on your radar. It’s tax-advantaged, low-cost for the company, and a powerful recruitment and retention tool.

But growth shares often work alongside EMI, or as a smart alternative when you want to reward non-employees (e.g. freelancers or advisors) or your company doesn’t qualify for EMI, etc.

Gold standard equity management: getting it right from day one

Whether you’re issuing ordinary shares, growth shares or options, there are a few key principles to follow:

1. Set clear rules

If the share type you use allows it, create vesting schedules, leaver provisions, and performance conditions around your equity. This protects your cap table and ensures shares go to those who earn them.

2. Be transparent

Make sure your team understands what they’re getting, how it works, and what needs to happen for their shares to be worth something. Trust is built through clarity.

3. Go digital

Managing equity on spreadsheets is a fast track to mistakes and confusion. Use a purpose-built sharetech platform like Vestd to issue, track and manage shares cleanly – and stay compliant.

Which is right for you?

If you’re bringing in a co-founder or early-stage hire who’s instrumental to your business, ordinary shares might be the right call.

If you’re scaling, want to incentivise future performance, or need flexibility across a more diverse team, growth shares give you precision and protection from day one.

And if you qualify for EMI? That’s still the gold standard for employee options in the UK.

Ultimately, your equity strategy should evolve as your business grows. But the businesses that get it right early tend to attract better talent, grow faster, and scale more sustainably.

Sharing isn’t just about ownership. It’s about building a culture of accountability, performance and shared success. And that’s something no growth-stage business can afford to overlook.

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Key takeaways

• Companies with share schemes can be over twice as productive as those without.
• Founders and early investors typically hold ordinary shares. If you hold ordinary shares, you hold an actual share in the company. Better if you’re bringing in a co-founder or early-stage investor who’s important to the business.
• Growth shares are an alternative that only become valuable if the company grows beyond a certain point. It’s a better option if you’re scaling, want to incentivise future performance, or need flexibility across a more diverse team.
• An Enterprise Management Incentive (EMI) is still the gold standard for employee options in the UK.
• Your equity strategy should evolve as your business grows.   

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Ifty Nasir is founder and CEO of Vestd.

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