How Family Investment Companies use Growth and Freezer Shares for smarter wealth planning

Family Investment Companies (FICs) have grown in popularity among high-net-worth individuals as a flexible and tax-efficient structure for managing and preserving family wealth. One of the most powerful planning tools within an FIC is the use of growth shares and freezer shares. These share classes allow families to manage how value is retained and transferred across generations, often with significant inheritance tax (IHT) and succession benefits.

What are Freezer Shares?

Freezer shares are typically issued to the founders or parents and are designed to lock in the current value of the FIC. They may carry rights to a fixed dividend and possibly capital repayment, but they do not participate in any future growth of the company’s value. In essence, they “freeze” the parent’s interest at today’s valuation.

This is a key estate planning strategy: by freezing the value of the shares held by older generations, any future growth in the value of the FIC can pass to children or trusts without increasing the founders’ taxable estate.

What are Growth Shares?

Growth shares are issued to the next generation (e.g. children or trusts for their benefit). These shares only participate in value above a pre-agreed “hurdle”, typically the current market value of the company at the time of issue.

For example, if the FIC is worth £2 million today, growth shares might only gain from any value above that threshold. As the company grows through reinvestment, capital appreciation, or dividend income, this additional value accumulates in the hands of the new shareholders — outside the founder’s estate.

How it works in practice

This structure allows parents to retain control of the FIC (often through voting freezer shares) while passing on the upside to the next generation. Importantly, no immediate capital gains or IHT is usually triggered upon issuing growth shares, making it a tax-efficient method of wealth transfer.

What should I do next?

If you require any assistance, guidance or advice, please contact Manjot Shokar or any other member of the corporate team at Geldards.