Plain-language definitions of the key terms used in Nigerian employee share plans and employee share investment schemes (ESIS).
30 terms · For Nigerian listed companies and their advisers
An employee who leaves the company under circumstances that result in forfeiture of all unvested shares. Typical bad leaver events: voluntary resignation, dismissal for gross misconduct, or breach of scheme rules.
A vesting structure under which all allotted shares vest on a single date (the cliff date) at the end of the vesting period. If the employee leaves before the cliff date, they forfeit all unvested shares (subject to good leaver provisions).
Deep dive: Cliff Vesting →Nigeria's central depository for listed securities. All NGX-listed shares are held in dematerialised form at CSCS. Employee share scheme participants must have a CSCS account to receive and hold shares. Each account holder has a unique CSCS Holder Number (CHN).
A unique identifier assigned to each registered shareholder at the CSCS. Required for any person to receive shares on the NGX. Employee share scheme administrators open CHN accounts for employees who do not already have one as part of the enrolment process.
The Companies and Allied Matters Act 2020. The principal corporate law governing Nigerian companies. Provides the legal foundation for share allotments, the independent trust exemption from financial assistance rules, and the governance framework for employee share schemes.
A tax on the profit made when selling an asset. Gains on disposal of shares listed on the NGX are currently exempt from Capital Gains Tax in Nigeria under the Finance Act. Employees who sell their vested shares are therefore not subject to CGT on the gain.
A method of operating an employee share plan where the company directly allots new or existing shares to employees (or to a trust on their behalf) without employees making a purchase payment. Allotments are subject to shareholder authority under CAMA 2020.
A payment made by a company to its registered shareholders from profits. Employee scheme participants who are registered CSCS shareholders are entitled to receive dividends in the same way as any other shareholder. Dividends are subject to 10% Withholding Tax.
Deep dive: Dividend →An arrangement under which cash dividends paid to scheme participants are automatically used to purchase additional shares rather than being paid as cash. Not common in Nigerian ESIS, but provided for in some advanced scheme rule structures.
Deep dive: Dividend Reinvestment →The formal SEC Nigeria regulatory term for an arrangement through which a listed company enables its employees to acquire or hold shares in the company. Governed by CAMA 2020, SEC rules, and NGX listing obligations.
A broad term for any formal arrangement through which a company grants or sells shares to employees. Encompasses allotment plans, payroll deduction schemes (ESPP), performance share plans, restricted stock units, and stock option plans.
A scheme under which employees make regular payroll deductions that are used to purchase company shares on the stock exchange on their behalf. Employees accumulate shares monthly through their salary contributions.
Deep dive: Employee Stock Purchase Plan (ESPP) →A scheme under which employees receive the right — but not the obligation — to purchase company shares at a fixed price (the exercise price) within a set time window. The employee becomes a shareholder only on exercising the option.
A form of non-cash employee remuneration in which the employee receives shares (or rights over shares) rather than — or in addition to — cash. Includes direct allotments, ESPPs, options, and phantom plans.
Deep dive: Equity Compensation →A broad term for arrangements under which employees have a financial stake in the company they work for — through shares, options, phantom plans, or profit-sharing schemes. Research consistently links employee ownership to higher engagement, productivity, and retention.
Deep dive: Employee Ownership →A vesting structure under which shares vest in tranches over the vesting period — for example, one-third per year over three years. Provides a continuous retention incentive and gives employees a partial benefit for time served.
Deep dive: Graded Vesting →An employee who leaves the company under circumstances specified in the scheme rules as entitling them to retain a pro-rata portion of their unvested shares. Typical good leaver events: retirement, redundancy, ill-health, disability, death, or departure by mutual agreement.
A formal legal trust structure used in employee share schemes to hold shares on behalf of participants pending vesting. The trust is governed by a trust deed, managed by independent trustees, and registered with the Corporate Affairs Commission (CAC).
The primary stock exchange in Nigeria. Shares allotted to employees under listed company ESIS are registered and traded on the NGX (formerly the Nigerian Stock Exchange).
A scheme under which shares are awarded to employees conditional on the achievement of performance targets (e.g., earnings growth, share price targets, or strategic milestones) over a performance period.
A cash-settled plan that tracks the value of company shares without issuing actual shares. Employees receive a cash payment equivalent to the increase in share value over a reference period. Used frequently by private companies that cannot offer listed shares.
A mechanism for funding employee share plan contributions by deducting a fixed amount from the employee's gross salary each month. The deductions are transferred to the scheme administrator and used to purchase shares on the NGX.
Deep dive: Payroll Deduction →Nigeria's employment income tax system. The market value of shares allotted to an employee under an ESIS is treated as a taxable employment benefit and is subject to PAYE at the time of allotment.
A conditional entitlement to receive shares at a future date. Unlike options, RSUs have no exercise price — they are simply awarded and vest over time. The employee receives actual shares on vesting.
The formal act of issuing shares to a named participant. Under CAMA 2020, an allotment of shares must be authorised by the company's shareholders. An allotment authority specifies the maximum number of shares that can be allotted and the duration of the authority.
Deep dive: Share Allotment →The Securities and Exchange Commission of Nigeria. The apex regulator of the Nigerian capital market. Listed companies must notify SEC Nigeria when establishing an ESIS, and must file annual compliance reports on the scheme.
The legal document that establishes the independent trust for an employee share scheme. It sets out the powers and duties of the trustees, the rights of beneficiaries (scheme participants), and the mechanics of allotment, vesting, leaver provisions, and distribution.
The process by which an employee's right to allotted shares becomes unconditional. During the vesting period, the employee holds 'unvested' shares that they cannot sell and may forfeit if they leave. On the vesting date, shares become the employee's unconditional property.
Deep dive: Vesting →The time between the allotment date and the vesting date — the period during which shares are subject to forfeiture conditions. Most Nigerian ESIS use vesting periods of three to five years.
Deep dive: Vesting Period →A tax deducted at source on certain income payments. Dividend payments to Nigerian shareholders — including employee scheme participants — are subject to WHT at 10%, deducted by the company before the dividend reaches the shareholder.
Shares Saver handles the complete administration of employee share investment schemes for Nigerian listed companies.
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