CAMA 2020 introduced important changes to how listed Nigerian companies can structure and operate employee share schemes. Here is a plain-language guide to the key provisions.
Important disclaimer
This article is for general information purposes only and does not constitute legal advice. CAMA 2020 is complex legislation and its application depends on specific facts. You should obtain advice from a qualified Nigerian corporate lawyer before structuring or modifying an employee share scheme.
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The Companies and Allied Matters Act 2020 (CAMA 2020) is the primary legislation governing Nigerian companies. It introduced significant changes to several areas relevant to employee share schemes — particularly around a company's ability to acquire its own shares, the financial assistance prohibition, and the requirements for board and shareholder approval. Understanding these provisions is essential for any company designing or operating an ESIS.
Under CAMA 2020, a company may acquire its own shares for the purpose of a bona fide employee share scheme, provided that: the acquisition is funded from distributable profits (not capital); the company is not insolvent at the time of acquisition; the board has passed a specific resolution authorising the acquisition; and the shares acquired do not exceed 10% of the company's issued share capital in any financial year without shareholder approval. Shares acquired in this way are treasury shares — they can subsequently be transferred to scheme participants on allotment.
CAMA 2020 prohibits a company from giving financial assistance for the purpose of acquiring its own shares. In the context of employee share schemes, 'financial assistance' can include a company lending money to employees to buy shares, guaranteeing loans for that purpose, or providing gifts of value to facilitate share acquisition. The prohibition exists to protect creditors and existing shareholders from the company's resources being used to fund transactions that benefit insiders.
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CAMA 2020 provides an exemption from the financial assistance prohibition for bona fide employee share schemes. The exemption applies where: the scheme is established in good faith for the benefit of employees or former employees; the assistance is provided by the company in ordinary course of business; and the assistance does not materially prejudice the interests of the company or its shareholders. The independent trust structure is the standard mechanism for satisfying this exemption — the trust holds and administers shares on behalf of employees, and the company's support is channelled through the trust rather than directly to individual employees.
An independent trust for an ESIS must be properly constituted under a trust deed that complies with the Trustee Investments Act and is registered with the Corporate Affairs Commission (CAC). The trustees (who must be independent of the company's management) hold the scheme shares on behalf of employees. This structure provides several benefits: CAMA 2020 financial assistance compliance; employee confidence that their shares are held securely by a third party; and a clear governance framework for scheme decisions including allotments, vesting, and leaver handling.
For most ESIS structures, CAMA 2020 requires both a board resolution authorising the scheme and — for allotment of new shares or acquisition of treasury shares above the 10% threshold — shareholder approval at a general meeting. The board resolution must specify the scheme terms, participant eligibility, maximum shares available, and the funding mechanism. The shareholder resolution should be an ordinary resolution (simple majority) unless the scheme involves a rights offering or other transaction requiring a special resolution.
A professional ESIS administrator such as Shares Saver works within the CAMA 2020 framework from scheme inception — helping to structure the trust deed, coordinating board resolution requirements with the company secretary, managing CSCS allotment in compliance with share capital rules, and providing annual compliance documentation. The regulatory complexity of CAMA 2020 is one of the strongest arguments for using a professional administrator rather than attempting to manage scheme compliance in-house.
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