Employee Share Option Plans (ESOPs) are becoming an increasingly important tool for Nigerian startups seeking to attract and retain top talent, but Nigeria’s legal and tax framework has yet to fully catch up with the realities of startup equity compensation.
While ESOPs can align employee incentives with long-term business growth, startups must navigate significant uncertainty around discounted share issuance, taxation, share allotments, vesting, leaver provisions, and regulatory oversight. With no comprehensive statutory framework governing employee equity compensation, businesses are increasingly relying on contractual arrangements and alternative structures such as nominee arrangements, founder vesting, and phantom equity.
In Issue 05 of the Private Equity and Venture Capital Association Nigeria’s (PEVCA) LRC Bulletin, our article on “Employee Share Option Plans in Nigerian Startups: What the Tax, Corporate and Regulatory Framework Actually Permits” examines the legal and tax challenges surrounding ESOPs, the structuring options available to startups, the enforceability of vesting and leaver provisions, and the evolving regulatory outlook under the Investments and Securities Act 2025.
Read the full article here on pages 63–68.