Family investment company: founder shares, growth shares and loan assignments for the next generation

At a glance

A couple who had built up substantial value in their company wanted to pass future growth to their three children while keeping control and protecting the value already built up. Working with their tax adviser, we reorganised the company: the existing shares became founder shares, a new class of growth shares was issued to the children, and part of the money the company owed the founders was assigned to the children. The documents were agreed in the autumn of 2025.

The client and the objective

The founders wanted their children to benefit from the company's future growth, with the same terms for each child, while they kept control of the company and the value already in it. The arrangements also had to be efficient for inheritance tax.

The deal

• Existing ordinary shares converted into founder shares, with capital rights on a winding-up capped at their existing value.
• A gift of shares from one founder to the other.
• A new class of growth shares issued directly to each of the three children.
• Part of the founders' loan account assigned to the children by deed, with a long-term loan agreement.
• New articles and deeds of adherence for the new shareholders.

Key legal issues and how we solved them

Valuing the growth shares

Growth shares are only efficient if their value at issue is low. The tax adviser flagged the risk that the shares carried hope value, and a professional valuation was recommended so that the position could be supported.

A child who is also a director

Shares acquired by a director can be treated as employment-related securities, with income tax consequences. Giving all three children identical terms, as part of a documented succession plan, made it clear that the shares were a family gift rather than a reward for work.

Assigning the loan

The founders' loan to the company was a valuable asset. Assigning part of it to the children by deed, with the loan made repayable over the long term, moved value to the next generation. The deeds were refined to minimise the inheritance tax risk.

Getting the order of steps right

Issuing the growth shares directly to the children was cleaner than issuing them to a parent first. Board and shareholder resolutions were prepared before any filing at Companies House.

Outcome

The family has a structure under which future growth accrues to the children, the founders keep control and the existing value is protected.

What this deal shows

• Growth shares work best when issued before the value grows, with a supporting valuation.
• Treating all children the same helps with both family harmony and tax.
• A company's debt to its founders can be part of succession planning, not just its shares.