What Is Share Allocation (Share Allotment)?
Share allocation — also called share allotment — is the foundational process in any employee share plan that involves the issue of actual shares. When a company runs a share plan, it uses its board-approved allotment authority to issue shares to employees, either directly or via a trust.
Share Allocation (Allotment). Share allocation (or share allotment) is the formal act of issuing shares to a named recipient. In the context of employee share plans, it is the process by which a company issues shares to employees as part of an ESIS.
How share allotment works under CAMA 2020
CAMA 2020 requires that share allotments be authorised by a resolution of the company's shareholders at a general meeting. The resolution specifies the maximum number of shares that can be allotted, the duration of the authority, and whether the allotment is to employees under an approved ESIS. Without a valid allotment authority, the company cannot legally issue new shares to employees.
New shares vs existing shares
Share allotments can be structured using newly issued shares (which dilutes existing shareholders) or using existing shares purchased in the open market by the trust (which avoids dilution). Most Nigerian ESIS use a combination: the trust purchases shares on the NGX, holds them, and then 'allots' them to employees on vesting. This minimises dilution and reduces the SEC notification requirements associated with new share issuance.
The allotment register
Every allotment must be recorded in the company's allotment register, which forms part of the statutory registers maintained by the company secretary. The scheme administrator provides the company secretary with the allotment data for each employee after each allotment event. Shares Saver generates allotment schedules in the format required by Nigerian company secretarial practice.
Questions
About share allocation (allotment)
This article is for general information and educational purposes only. It does not constitute financial advice, investment advice, legal advice, or tax advice. The value of investments can fall as well as rise. Seek independent regulated financial advice before making any investment decision. Shares Saver does not provide financial advice.
Own shares in your name
Start from ₦10,000 a month. Pause whenever you like.