Company Law Issues Around Employee Share-Based Compensation In Nigeria

Employee Share-Based Compensation (“ESBC”) is becoming more prevalent among companies, particularly startups, as a means of motivating and promoting employee dedication. The advantages are numerous: ESBC encourages employee retention since shares typically have a vesting period or exercise requirement, aligns the interests of employees and shareholders in promoting the company's success and increasing the share price, and enables the company to compensate its employees without negatively impacting its cash flow. Whilst this may appear to be a fair and attractive bargain, a clear review of the Companies and Allied Matters Act 2020 (“CAMA”), indicates that most ESBCs might be unlawful.