Vesting

Vesting appears in three documents.

The founders agreement, where co founders vest their own shares against each other. This is the one most Nigerian founders skip and most regret skipping.

The shareholders agreement, where investors require founder vesting as a condition of investment. If it was not agreed at the start, it will be imposed later on worse terms.

An employee share scheme, where key hires are given equity that vests over time in place of cash they could not otherwise be paid.

The terms that matter beyond the schedule are the leaver provisions. A good leaver, someone who leaves for reasons such as illness or by agreement, typically keeps what has vested. A bad leaver, someone dismissed for cause or who breaches the agreement, may lose more, sometimes including vested shares at a reduced price.

Acceleration is the other term to negotiate. Single trigger acceleration vests everything on a sale of the company. Double trigger requires both a sale and the person losing their role. Investors generally prefer double trigger.

Implementation needs care, because CAMA does not have a concept of unvested shares sitting in limbo.

The practical Nigerian approach is contractual. The shares are issued and registered in the holder's name, and the founders or shareholders agreement creates the obligation to transfer the unvested portion back to the company or to the other shareholders at nominal value if the person leaves before vesting. Undated transfer forms signed in advance make that enforceable in practice rather than only in theory.

That is why the agreement matters more than the register. Without it, a departing co founder simply keeps their shares, and the remaining founders discover that the register says exactly what the departing person wants it to say.

The most common Nigerian pattern is depressingly consistent. Two or three people start a business, split the equity on day one, and one of them stops showing up within a year. The others carry the business and the absent person retains a third of it, which then blocks the first investment round.

Vesting is a one page clause that prevents all of it, and it costs nothing to agree while everybody is still enthusiastic.

Three ways to give somebody equity, with different mechanics.

A straight grant transfers shares outright. The person owns them immediately and keeps them whatever happens next. It is simple and it is the arrangement founders regret most often.

Vesting grants the shares subject to conditions, whether by issuing them progressively or by issuing them upfront with a buy back right over the unvested portion. The person earns them by staying.

A share option gives the right to acquire shares later at a fixed price, usually itself subject to a vesting schedule. The holder is not a shareholder until they exercise, which keeps the register simpler and defers the decision.

Startups typically use founder vesting for the founders and options for employees, because options avoid putting many small shareholders on the register.

Vesting is contractual, so it is only as good as the document and the willingness to enforce it. A departing founder who refuses to sign a transfer, where no undated form was taken in advance, creates a real problem.

Valuation on a buy back is another flashpoint. Whether unvested shares come back at nominal value, at cost or at fair value should be stated, because arguing about it afterwards is expensive.

It also does not solve everything. A co founder who stays but disengages still vests, which is why founders agreements deal with roles and commitment as well as with equity.

And retrofitting vesting is hard. Asking an existing shareholder to accept vesting on shares they already hold requires their agreement, and they may reasonably refuse.