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.
Definition
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.
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.
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.
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.
The duration of an allotment authority is specified in the shareholder resolution that grants it. For ESIS purposes, a multi-year authority (e.g., five years) is typically granted to cover the full scheme cycle. It can be renewed by passing a new resolution at a subsequent general meeting.
SEC Nigeria requires notification when a new ESIS is established, and periodic reporting on allotment activity. The exact notification requirements for individual allotment events depend on the scheme structure and whether new shares or market-purchased shares are used. Shares Saver coordinates with legal advisers on all SEC notification obligations.
Shares Saver lets you buy and own NGX-listed shares directly in your own name through regulated broker execution.
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