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by Undo Capital
December 15, 2025
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What Are Notional Shares/Phantom Shares?

Notional shares, also known as phantom shares, are contractual rights to receive a cash bonus linked to a company’s value, without actual share ownership.

Notional Shares/Phantom Shares Meaning

The notional shares' meaning centres on delivering economic upside without issuing real equity. To define phantom shares in practice, holders do not own legal shares and have no voting rights, but they receive a cash payout that mirrors what they would earn if they held real shares at an exit or liquidity event. A clear notional shares / phantom shares definition makes these plans popular for senior employees, advisors and international team members where issuing equity is complex or undesirable. Phantom shares stand for incentive alignment without dilution or shareholder complexity.

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Disclaimer: Our services are designed to assist startups and businesses with company formation, legal agreements, and funding-related documentation. We do not provide investment advice, financial advice, or tax advice, nor are we regulated by the Financial Conduct Authority (FCA). Participating in startups and early-stage enterprises carries inherent risks, including limited liquidity, absence of dividends, potential loss of investment, and dilution. Any decisions regarding investments should be made independently by the investor as part of a well-diversified portfolio.