How to Give Shares to Advisors, Consultants and NEDs for their Services: A Guide to Tranche Issuance

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Why Issue Shares in Tranches?

Issuing shares in tranches means you release equity gradually as services are actually delivered, rather than granting the full amount upfront.

Think of it the same way you would pay someone in cash. You wouldn’t normally pay a consultant a full year’s fee on day one before any work has been done. Instead, you’d pay them monthly or quarterly as they deliver results over time.

Equity compensation, much like cash payment, should be aligned with the delivery schedule of the work. If someone is contributing over 12 months, it makes sense to issue their shares in stages, or "tranches," matching that delivery schedule. This ensures they are rewarded fairly for the work completed, rather than issuing all shares upfront for work that hasn't happened yet.

This approach offers several key benefits:

Align Reward with Contribution:
Tranches ensure the recipient only receives equity for work actually completed/being completed. If the engagement ends early, they keep what they earned, and the company keeps the rest.

Eliminate Clawback Hassles:
Upfront issuance often requires "reverse vesting" with complex clawback provisions. If a consultant leaves early and refuses to cooperate, recovering those shares can be legally difficult and expensive.

Setting Up Your Tranche Schedule

When creating your agreement on SeedLegals, you can choose a schedule that fits the rhythm of the work:

Time-Based Tranches: Monthly, quarterly, or yearly issuances are ideal for ongoing advisory roles.
Custom Schedules: For unique arrangements, you can define a bespoke timetable.

Pro Tip : Always define an “Issuance Period” by adding an end date for the arrangement, so both parties are clear on the full duration of the arrangement and how many tranches will be issued.

How do I work out how many shares to give an Advisor, NED or consultant?

The problem:

Many founders offer a flat percentage of the company, i.e "1% of the company", to an advisor because it sounds simple. However, this often leads to overpaying for services as your company grows.

Fixed Percentages are Expensive: If you promise 1% today, and your company value triples after a funding round, that "payment" has suddenly tripled in cost for the same work.
The Problem with Stage-by-Stage Issuance: If you issue shares over a year, the shares you give in month 12 will be much more valuable than those in month 1. This means the advisor gets an unintended "pay rise" as you become more successful.
Investor Red Flags: Investors may question why an advisor is receiving highly valuable shares at an outdated, low price. It can look like poor governance and may slow down your fundraising.

In short, promising a fixed percentage is a gamble where the better your company performs, the more expensive that advisor becomes.

The solution (and our recommended approach at SeedLegals) is what we call floating valuation, so that you issue the right amount every time.

Floating Valuations: Issuing the Right Amount Every Time

Floating valuation is a simple concept: Instead of fixing the number of shares, you fix the value of the work, and calculate how many shares that value buys at the time they are issued.

In other words, you’re not saying:

“We’ll give you 1%” or “We’ll give you 100 shares”

You’re saying:

“We’ll give you £X worth of shares”, and the number of shares will adjust based on the company’s current valuation each time.

Instead of agreeing on a number of shares, agree on the value of the services.

How it works in practice

Let’s say:

You agree that an advisor’s work is worth £6,000 over 12 months
Shares are issued quarterly → £1,500 per tranche

Each time you issue shares:

Confirm your latest company valuation
For example, your company is currently valued at £1M
Confirm your total number of shares (fully diluted)
For example, your company has 1,000,000 shares on a fully diluted basis
Calculate your price per share (PPS)
PPS = Valuation ÷ fully diluted number of shares
→ £1,000,000 ÷ 1,000,000 shares = £1 per share
Work out how many shares to issue for that tranche
Take the value of the tranche and divide it by the PPS
→ £1,500 ÷ £1 = 1,500 shares

This ensures each tranche reflects your company’s current value, so you always issue the right number of shares.

What Happens If Your Valuation Changes?

Let’s continue the example above, where each tranche is worth £1,500.

First tranche:
Company valuation = £1M
Price per share (PPS) = £1

→ £1,500 ÷ £1 = 1,500 shares issued

Next tranche (valuation increases):
Company valuation = £2M
PPS = £2

→ £1,500 ÷ £2 = 750 shares issued

If valuation had decreased instead:
Company valuation = £750k
PPS = £0.75

→ £1,500 ÷ £0.75 = 2,000 shares issued

What this means

If your valuation goes up → each share is worth more → you issue fewer shares
If your valuation goes down → each share is worth less → you issue more shares

In all cases, the advisor still receives £1,500 of value per tranche; the number of shares simply adjusts to reflect your company’s latest valuation.

Why This Works

The advisor always receives the full agreed value for their work
The company avoids giving away too much equity if it grows
Everything stays aligned with your latest valuation, just like with investors

In one sentence, floating valuation means:

“We’ll pay you the agreed value in shares, and adjust the number of shares at each tranche so it’s always fair at the time.”

Here’s also a short video that walks through how tranche issuance and floating valuation work together in real scenarios, so you can see how share amounts adjust over time as company valuation changes.

A Note on Tax and Rights

Remember that once shares are issued, the recipient becomes a statutory shareholder with rights to dividends and voting (unless otherwise specified).

Issuing shares in exchange for services can have tax implications for both the company and the recipient. Where shares are issued in tranches, tax considerations may arise each time a tranche is issued.

Both parties should obtain independent tax advice before issuing or receiving shares to ensure they understand the tax implications of the arrangement.

Ready to start? Create your Advisor, Consultancy or NED Agreement today and select to issue shares "In tranches every quarter/year" to keep your equity management simple and safe.

You can follow these step-by-step guides to get started:

Any questions?

If you have any further questions, click the bottom right button to message us in chat, we'll be happy to help.