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A Stock Option Agreement gives employees or contractors the right to buy company shares at a fixed price within a specific timeframe. In Nigeria's growing tech and startup scene, these agreements help companies attract top talent by offering a chance to own part of the business, usually at prices below market value.

Under Nigerian corporate law, particularly the Companies and Allied Matters Act (CAMA), these agreements must clearly spell out key terms like the strike price, vesting schedule, and exercise period. Many Nigerian firms structure their options to vest over 4 years, with a one-year cliff period before any shares can be purchased, helping retain valuable team members while building long-term value.

Stock Option Agreements become essential when your Nigerian company needs to attract and retain top talent without spending immediate cash. They work especially well for startups and growth-stage companies looking to compete with larger firms for skilled employees, particularly in tech hubs like Lagos and Abuja.

Use these agreements during key hiring negotiations, funding rounds, or when implementing employee incentive programs. Nigerian corporate law allows companies to offer stock options as part of compensation packages, making them valuable for both recruitment and retention. Many businesses introduce them before major expansion phases or when preparing for future fundraising to align employee interests with company growth.

• Incentive Stock Options (ISOs): Reserved for employees only, offering tax advantages under Nigerian law and typically vesting over 4 years
• Non-Qualified Stock Options (NSOs): More flexible agreements used for contractors, advisors, or non-employee service providers
• Performance-Based Options: Tied to specific company or individual milestones, common in Nigerian startups
• Time-Based Options: Standard vesting schedule with a one-year cliff, followed by monthly or quarterly vesting
• Early Exercise Options: Allows immediate purchase of unvested shares, subject to company buyback rights if employment ends early

• Company Board: Approves and authorizes the stock option plan, sets terms, and determines allocation pools
• Legal Counsel: Drafts and reviews Stock Option Agreements to ensure compliance with Nigerian corporate law and SEC regulations
• HR Department: Administers the agreements, tracks vesting schedules, and manages employee communications
• Option Recipients: Usually employees, executives, or key contractors who receive the right to purchase shares
• Company Secretary: Maintains official records, handles documentation, and ensures proper corporate governance
• Corporate Affairs Commission: Oversees compliance with Nigerian company law regarding share issuance and transfers

• Company Details: Gather current share valuation, authorized share capital, and shareholding structure
• Option Terms: Define exercise price, vesting schedule, and total shares allocated to the option pool
• Recipient Information: Collect full details of option holders, including employment status and position
• Board Approval: Secure necessary corporate authorizations and resolutions as required by CAMA
• Vesting Rules: Outline clear conditions for share vesting, including time periods and performance metrics
• Tax Implications: Document Nigerian tax considerations for both company and option holders
• Exercise Process: Detail the steps recipients must follow to exercise their options when eligible

• Grant Details: Number of shares, exercise price, and grant date clearly stated
• Vesting Schedule: Specific timeline and conditions for option maturity under Nigerian law
• Exercise Terms: Procedure and timeframe for converting options into shares
• Termination Provisions: Impact of employment ending on vesting and exercise rights
• Shareholder Rights: Voting and dividend privileges before and after exercise
• Transfer Restrictions: Limitations on selling or transferring options per CAMA requirements
• Tax Acknowledgments: Nigerian tax implications for both company and recipient
• Governing Law: Explicit reference to Nigerian corporate law and jurisdiction

A Stock Option Agreement differs significantly from a Stock Purchase Agreement in several key ways. While both deal with company shares, they serve distinct purposes under Nigerian corporate law.

• Timing of Purchase: Stock Option Agreements grant future rights to buy shares at a preset price, while Stock Purchase Agreements facilitate immediate share transfers
• Price Structure: Options typically offer below-market prices fixed at grant date, whereas Purchase Agreements reflect current market value
• Vesting Requirements: Option Agreements include vesting schedules and conditions, but Purchase Agreements execute immediate ownership transfer
• Target Users: Options usually incentivize employees and contractors, while Purchase Agreements serve investors and strategic buyers
• Risk Profile: Options carry no obligation to buy, but Purchase Agreements create immediate payment obligations and ownership responsibilities