Clear answers to the questions Nigerian HR teams, company secretaries, and employees ask most about employee share plans.
An employee share plan (also called an Employee Share Investment Scheme or ESIS) is a formal arrangement through which a listed company enables its employees to acquire or receive shares in the company. Plans are used to reward performance, retain key talent, and align employees with the long-term interests of shareholders. They are governed in Nigeria by CAMA 2020, SEC Nigeria rules, and NGX listing obligations.
Yes. Any company listed on the Nigerian Exchange Group (NGX) can establish an employee share plan, subject to board approval and — where required — shareholder consent at a general meeting. The legal framework under CAMA 2020 provides a clear pathway for listed companies to allot shares to employees through an independent trust structure.
Under a payroll deduction scheme (similar to an Employee Stock Purchase Plan), a fixed amount is deducted from the employee's salary each month and used to purchase company shares on their behalf through the NGX. The purchased shares are registered in the employee's name at the CSCS. Employees can also receive shares through annual allotments without making a cash contribution.
Yes. When shares are allotted to an employee, the market value of the shares at the allotment date is treated as a benefit in kind and is subject to PAYE. Dividends on shares are subject to 10% Withholding Tax deducted at source. Gains on disposal of NGX-listed shares are currently exempt from Capital Gains Tax under the Finance Act. You should consult a qualified Nigerian tax adviser for advice specific to your situation.
Private companies can offer employees a share stake under CAMA 2020, but they face important practical limitations that listed companies do not. The key challenge is liquidity — private company shares cannot be freely sold on an exchange. Phantom share plans (cash-settled) or share option plans are often used by private companies as an alternative to direct share allotment.
This depends on the scheme's leaver provisions. A 'good leaver' (retirement, redundancy, ill-health, death, or departure by mutual agreement) typically retains a pro-rata portion of unvested shares based on time served in the vesting period. A 'bad leaver' (resignation or dismissal for cause) typically forfeits all unvested shares. Vested shares always belong unconditionally to the employee, regardless of how they leave.
After allotment, shares are registered in each employee's name at the Central Securities Clearing System (CSCS). An independent trust holds unvested shares on behalf of employees. A professional ESIS administrator — such as Shares Saver — manages the ongoing administration: tracking vesting schedules, processing vesting events, distributing dividends, and providing employees with access to their share account through an online portal.
Employee scheme participants who are registered shareholders at the CSCS are entitled to dividends in the same way as any other shareholder. Dividends are paid by the company's registrar directly to the employee's registered bank account (via e-dividend). Withholding Tax of 10% is deducted at source. Where shares are unvested and held in the trust, the scheme rules determine whether dividends are accumulated, paid currently, or reinvested as additional shares.
A share allotment gives the employee actual shares immediately (subject to vesting). An Employee Stock Option Plan (ESOP) gives the employee the right to purchase shares at a fixed price in the future — the employee only becomes a shareholder when they exercise the option. Options are useful when a company wants to provide upside participation without the immediate tax event associated with a share allotment.
A vesting period is the time an employee must remain employed before their right to allotted shares becomes unconditional. During the vesting period, the employee holds unvested shares that they cannot sell — and will forfeit if they leave (depending on the leaver provision). After vesting, the shares belong unconditionally to the employee. Most Nigerian ESIS use a vesting period of three to five years, either in a single cliff vest or as graded tranches.
Yes. SEC Nigeria requires listed companies to notify the Commission when establishing an ESIS. The specific notification requirements depend on the scheme structure and method of share acquisition. Shares Saver works alongside legal advisers with SEC notification experience to ensure the correct filing process is followed for each scheme.
Shares Saver handles the end-to-end administration: coordinating with the company's payroll team, executing share purchases or allotments, registering shares at CSCS in each employee's name, managing vesting schedules and events, distributing dividends, producing SEC Nigeria and NGX compliance reports, and providing each employee with an online portal to view their share account in real time.
Talk to the Shares Saver team about your specific employee share plan requirements.
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