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The short answer
Nigerian company law has no vesting mechanism of its own, so co-founders build vesting by contract: a shareholders' agreement and articles that oblige a departing founder to transfer unvested shares, or shares allotted in stages as time passes. Under CAMA 2020 every share must be issued (there is no authorised-but-unissued pool), each allotment is reported to CAC within one month, and a company buy-back has strict conditions, so the transfer route is usually the simpler one.
Why vesting matters more when founders live in different countries
A company with one founder in Lagos running operations and another in London, Houston or Toronto raising money and building product is common. It is also fragile. If one founder stops working on the business after six months but keeps half the shares, the founder who stays carries the work while owning only half the result. Investors know this, which is why they ask how founder shares are protected before they put money in.
Vesting answers that question. Each founder earns their shares over a period, usually with a "cliff" before anything is earned. Someone who leaves early keeps only what they have earned. Distance makes the problem sharper: it is harder to see who is doing the work, time zones stretch decisions, and a founder abroad may take a new job without telling anyone for months.
What Nigerian company law gives you, and what it does not
The Companies and Allied Matters Act 2020 (CAMA) does not mention founder vesting. Three of its rules shape how you can build it:
- No authorised share capital. CAMA 2020 abolished authorised share capital, so a company's share capital is simply its issued shares at any time (section 868, as summarised by ENR Advisory in March 2021). Pavestones Legal noted in April 2021 that companies can no longer reserve a slice of share capital for future investors or option schemes.
- Minimum issued capital. A private company must have issued share capital of at least ₦100,000 (section 27(2), per Pavestones).
- Allotment rules. New shares need authority from the shareholders or, where the articles allow, the board (section 149(3)); the allottee must signify interest in writing; the allottee is told within 42 days (section 150(1)); and the company files a return of allotment within one month (section 154(1)(a)).
Because there is no "unissued" pool to hold back, vesting in a Nigerian company is a contract between the shareholders, written into the shareholders' agreement and, ideally, mirrored in the articles so it binds the company too.
Two ways to build founder vesting
1. Reverse vesting: shares issued now, unvested shares transferred on leaving
Each founder takes all their shares at incorporation. The shareholders' agreement says that if a founder leaves before the vesting period ends, they must transfer the unvested portion to the remaining founders (or a nominee) at nominal value or another agreed price. This is the most common pattern because the founder is a full shareholder from day one, with votes and dividends, and nothing more has to be issued later.
A buy-back by the company itself is possible but heavy. Under sections 184 to 187 of CAMA, as summarised by Udo Udoma & Belo-Osagie, the articles must permit it, shareholders pass a special resolution, the shares must be fully paid, payment comes from distributable profits, the buy-back is published in two national newspapers within seven days, and directors file a declaration of solvency with CAC within 15 days of publication. A young company with no profits usually cannot use it, which is why a transfer to the other founders is the normal route.
2. Staged allotment: shares issued as they are earned
Each founder starts with a smaller holding and the company allots more shares at agreed dates or milestones. Every tranche needs a resolution, written acceptance and a return of allotment, so this creates more CAC filings and leaves the founder with fewer votes early on. It can suit founders who want no buy-back or transfer argument at all.
A worked example
Example only. Ada (Lagos) and Tunde (Manchester) each hold 500,000 of the 1,000,000 shares in their Nigerian company. The agreement sets four years of vesting with a one-year cliff, then monthly vesting.
| Point in time | Tunde's vested shares | Unvested, transferable if he leaves |
|---|---|---|
| Leaves at month 10 (before cliff) | 0 | 500,000 |
| Leaves at month 12 | 125,000 (12/48) | 375,000 |
| Leaves at month 18 | 187,500 (18/48) | 312,500 |
| Stays to month 48 | 500,000 | 0 |
If Tunde leaves at month 18, he keeps 187,500 shares and transfers 312,500 to Ada (or to a pool the agreement names) at the agreed price. The transfer is then recorded in the register of members and reported to CAC in the usual way.
Terms to write down, especially across borders
- Good leaver and bad leaver. Death, illness or being pushed out may let a founder keep more, or sell unvested shares at fair value; resignation to join a competitor may mean nominal value only.
- Acceleration. Whether vesting speeds up if the company is sold.
- What "leaving" means. For a founder abroad with a day job, define a minimum time commitment and role, not just employment.
- Signing mechanics. Who signs the share transfer form if a departing founder refuses. Many agreements appoint the company secretary or a director as attorney for that purpose; a power of attorney executed outside Nigeria is usually witnessed by a notary public (LawPavilion).
- Control disclosures. Changes that move someone above or below significant-control thresholds have their own notices: PwC notes a person with significant control tells the company within 7 days and the company tells CAC within one month.
Our guide to a shareholders' agreement with partners in Nigeria covers the rest of that document, and transferring shares from abroad covers the transfer itself. If you plan options for staff later, read share options for staff in a Nigerian company.
Where Pryme fits
Vesting is a legal question, not a banking one, but the paper trail helps. A Pryme Business Account can be opened from any country and holds the company's naira, dollar, pound and euro balances in one account, so founder capital contributions are on record, and the Compliance agent can prepare reminders for allotment returns and transfer filings for a director to approve.
Questions people ask
Is founder vesting legal in Nigeria?
Yes. CAMA 2020 does not regulate it, so it is a contract between shareholders. It works when written into a shareholders' agreement and reflected in the articles.
Can a Nigerian company keep unissued shares for a founder to earn later?
No. CAMA 2020 removed authorised share capital, so a company cannot hold back unissued shares. Use reverse vesting (transfer on leaving) or allot shares in stages.
How long does a company have to file a return of allotment with CAC?
Within one month of the allotment under section 154(1)(a) of CAMA 2020. Late filings attract default fees.
Can the company buy back a leaving founder's shares?
Only if the articles allow it, shareholders pass a special resolution, shares are fully paid and payment comes from distributable profits, with newspaper publication and a solvency declaration. Most early-stage companies use a transfer to the other founders instead.
Sources
- Pavestones Legal via Mondaq: CAMA 2020 share capital requirements (27 Apr 2021) · accessed Oct 2026
- ENR Advisory client alert: deadline for allotting unissued shares (19 Mar 2021) · accessed Oct 2026
- Udo Udoma & Belo-Osagie via Mondaq: CAMA 2020 share buy-back and treasury shares (8 Jan 2021) · accessed Oct 2026
- PwC Nigeria: key compliance obligations under CAMA 2020 and Companies Regulations 2021 (Apr 2021) · accessed Oct 2026
- LawPavilion: power of attorney in Nigeria, the law and the practice (undated) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.