Editor's note: This brief was summarised by The Property AI Newsroom from a report by Property118. Read the original article for full details.
Freezer and Growth Shares: Structuring Control and Income in Property Companies
A recent report from Property118 outlines how freezer and growth share structures can help property business founders separate control, income, and future family value when incorporating their companies. The article explains that while incorporation can address commercial challenges such as liability management, refinancing, and business continuity, it does not automatically resolve succession planning issues.
According to the report, a conventional company with a single class of ordinary shares combines control, dividend income, existing capital value, and all future growth into the same shares. This can force founders to choose between retaining full control and value or transferring shares—and potentially control and wealth—to the next generation earlier than intended.
The freezer and growth share structure offers an alternative. In this arrangement, founders typically hold A and B shares, which carry full voting rights, discretionary dividend rights, and the first entitlement to the company’s capital on a winding-up, up to a value fixed at the outset. These are referred to as freezer shares, as their capital entitlement is fixed by reference to the company’s value when the structure is established. The founders retain control, the value they have already created, and may continue to receive dividends from profits.
The report notes that additional share classes, usually labelled C through to P, may also be created. These classes do not carry voting control and have only nominal capital rights, but directors may have discretion to declare dividends on selected classes. This allows flexibility for future income distribution among family members without transferring voting control or existing capital value.
The article emphasises that terms like freezer share, dividend share, and growth share are descriptive only, and the legal position depends on the rights set out in the company’s articles. The Companies Act recognises that different classes of shares may have different voting, dividend, and capital rights.
This information may be relevant to UK letting agents and inventory clerks involved in property business incorporation or succession planning, as it highlights options for structuring company shares to balance control, income, and future family involvement.
Source: Property118