The important legal agreement to protect Startups and Founders in Nigeria

By Timi Olagunju

From over 5 years of practice, I have noticed one extremely important legal agreement that most startups in Nigeria are either unaware of or haven’t fully taken advantage of. This agreement is referred to as “the Vesting Agreement”. Quickly, before we go into the nitty-gritty of a vesting agreement, I will like to explain what “vesting” is and what are “vesting agreements or clauses”, strictly in the context of its functionality to a Nigerian startup.

Vesting is a process by which benefits, privilege, authority, rights, or interest in an asset or property passes unconditionally to a person; whether natural or artificial person. A natural person being a human being or an artificial person being a company or institution; a legal entity by virtue of the Companies and Allied Matters Act, 2004.

In Nigeria, vesting seems more common in an area such as energy (in which electricity generation and distribution companies entered a vesting agreement of 15 years), and less and less in the startup or tech space, which is a huge error. Although, vesting is not expressly provided for under Nigerian law, it is a smart business and contractual consideration that can be enforced in the Nigerian court like any other valid contract.

Why Vesting Agreements are important

Now, a vesting agreement (or clause) is an arrangement that spells out which benefits, privilege, authority, rights, or interest in an asset or property (which includes a startup) accrue to who and at what time. Vesting agreements ensure that at the beginning of the startup, founders get their full allotment of shares or equity stake to avoid double taxation, nevertheless, the company has the right to acquire a percentage of a founder’s equity in case he or she walks away. This means that if your partner walks away after a couple of months, he or she will not be able to claim the full worth of the company. The company would reserve the rights to acquire the run-away partners’ equity when he or she leaves the company.

Some years ago, a client who was referred to me called me up complaining that he and his friend started an “App”, but after a while, the other partner got tired and walked away, without looking back. My client decided to keep working on getting traction and investments for it, until one day, a member of the Lagos Angel Network (LAN) offered to buy a large interest in it. This made the news, and it was not long before the run-away partner, gave a phone call to my client asking for half the share of the monies received. This could have been solved by a vesting agreement prepared by a lawyer with understanding on startups.

I will also like to use the Facebook case, since Mark visited Nigeria recently. However, Mark wouldn’t have been “The Mark Zuckerberg” but for a legally binding vesting agreement that secured his interests in Facebook, even in the midst of law suits. How, you might ask? Remember, the movie, The Social Network — Zuckerberg’s friend (besides the twin brothers) returned to demand for his stake as co-founder with significant interest in the Facebook, but his claims couldn’t hold water, because the vesting agreement provided for a significant decline in shares, if a founder is inactive.

In effect, vesting protects partners from each other and aligns incentives so everybody focuses towards the common goal of building a sustainable, rewarding, and successful company, much more than a mere partnership agreement would do.

How startup vesting works

Unlike clauses in a partnership agreement, vesting clauses for startups are usually prepared to last 4 years, with a 1 year cliff. This means that if you had 50% equity and leave after two years you will only retain 25%. The longer you stay, the larger percentage of your equity will be vested until you become fully vested in the 48th month (four years).

Each month that you actively work full-time in your company, 1/48th of your total equity package will vest onto you. However, because you have a one year cliff, if one of the founders leaves the company before the 12th month, then he or she walks away with nothing; whereas staying until day 366 means you get one-fourth of your stocks vested instantly.

Say, for instance, your company gained some traction and raised investment during its 24th month, and the equity was divided 35% for yourself, 35% for your partner and 30% for the investors. Should your partner walk away he will hold 17.5%. What happens with the other 17.5%? Nothing! It virtually disappears after the company has repurchased it from your partner. Remember, when the company was registered, a fixed number of shares- say 2,000,000 units- were issued to cover 100% of equity. If the previously mentioned example occurs, 350,000 shares vanish representing that 17.5%, bringing down the total to 1,650,000 shares. All the other shareholders benefit because now they have a larger percentage of the company. On the other hand, if the startup gets acquired before the founders are fully vested, then each founder (partner) vesting literally accelerates until all – or at least most shares get vested.

A sample vesting agreement

In conclusions, as we have established the significance of a vesting agreement for a startup specifically, here is an example of a vesting clause or agreement I drafted for you below. I must emphasise the importance of seeking legal support from a startup lawyer with the understanding of the Nigerian business climate, in such circumstances.

“Subject to terms of this agreement, vesting will occur based on the following schedule:

Until and through [FIRST VESTING DATE], neither Founder’s shares will vest.

On and not before [FIRST VESTING DATE]– [25%] of each Founder’s shares will vest.

On and not before the 1st of every month thereafter, [1/36TH] of the remaining [75%]will vest.

Thus, on [END DATE] (the “Full Vesting Date”), each Founder will be 100% vested.

If either Founder ceases to provide services to the Company, resigns from the Company, or is terminated from service with the Company by a majority vote of the Founders according to their respective ownership interests, with or without cause or good reason, (the “Terminated Founder”) at any time prior to the Full Vesting Date (the “Termination Date”), none of the Terminated Founder’s additional shares shall vest. The Terminated Founder’s shares which has not vested as of the Termination Date shall be canceled or returned to the Company, and the Founder’s ownership interest shall be reduced by the amount of invested shares so canceled or returned.

{Additional clause on acquisition before full vesting} If both founders are still fully involved with the business and a liquidity event (such as the sale to a third party, an initial public offering, or other liquidity event) occurs, 100% vesting will occur immediately”.

https://techpoint.ng/2016/09/29/vesting-agreements/

Nigeria's Olufemi Elias Secures United Nations Appointment

United Nations Secretary-General Ban Ki-moon has announced the appointment of Olufemi Elias of Nigeria as the Registrar of the International Residual Mechanism for Criminal Tribunals, with effect from 1 January 2017. 

Mr. Elias will succeed John Hocking of Australia, to whom the Secretary-General is grateful for his service, including his instrumental role in setting up the Mechanism and overseeing the construction of its new premises in Arusha, Tanzania.

Mr. Elias has been serving as the Executive Secretary of the World Bank Administrative Tribunal since July 2016, a position which he also held from 2008 to 2013. He was the Legal Adviser and a Director at the Organisation for the Prohibition of Chemical Weapons (OPCW) from 2013 to 2016 and Senior Legal Officer at the OPCW from 2005 to 2008. He worked in legal positions at the United Nations Compensation Commission between 1998 and 2005. 

Mr. Elias is an associate member of the Institut de Droit International. A member of the Nigerian Bar, he holds a PhD from the University of London, a Master of Law from the University of Cambridge and a Master of Arts and a Bachelor of Arts in Jurisprudence from the University of Oxford.

Lagos to host Street Party

The Lagos state government in south west Nigeria, has concluded arrangements to host the maiden edition of the state’s Street Party.

The state Acting Commissioner for Tourism, Art and Culture, Mrs Adebimpe Akinsola gave this indication while briefing journalists on the line up activities of the Ministry for the rest of the year and beyond.

Mrs Akinsola who said that the Lagos State Street Party will hold between 3rd and 4th of December 2016 at the Ahmadu Bello axis of Victoria Island Lagos promised event of international standard.

“I can liken the Lagos Street Party to what the British call Nottinghill carnival, though our own is not as big as that, but we are starting this year at Victoria Island and hopefully next year the train will move to other parts of the areas in the state”. she said.

The acting Commissioner who promised adequate security for the fun seekers at the events explained that the two-day event was in a bid to showcase the rich culture of Lagos.

“This is just to put Lagos at the front row in terms of richness in its tourism potential, from art, local cuisine, hospitality among others” she added.

According to her ” Our ministry is saddled with the responsibilities to promote tourism, Hospitality, Entertainment, Sports for Excellent and we have been doing these with numbers of activities in the past”.

Akinsola, a former member of the state house of assembly maintained that as part of effort to regulate hospitality business in the state, the state would soon begin a clampdown on the hotels in the state without sign post.

She noted that the ministry recently held a stakeholders meeting on the preservation of heritage sites in the state and hope to hold Tourism, Art and Culture summit next year.

http://von.gov.ng/lagos-host-street-party/

Diamond, gold mining to begin in Adamawa

The mining of solid minerals including Diamond, Gold, Bitumen and Barite in Adamawa by a Swiss firm is to commence in December.

The state Commissioner of Solid Mineral Resources, Ms Shanti Shashi, made this known Saturday in Yola at the 4th Adamawa Community Dialogue organized by an NGO, the Adamawa Community Advancement Initiative (ACAI).

Shashi said the Swiss firm, BTP Swiss Sovereign Asset, and the Adamawa Mining Company would be involved in the mining of seven minerals comprising diamond, gold, zinc, bitumen, barite, uranium and platinum in the state under a three-year agreement.

Shashi said that the state government, which was committed to taping its solid mineral resources, had already acquired 12 mineral exploration licenses from the Federal Government.

While noting the numerous potentials of Adamawa in area of solid mineral resources, Shashi said the state was far ahead of other states in its level of preparation to exploit the resources.

“Adamawa is the most organized state as far as solid minerals is concern. We have gone far in talks with Dangote Group on Guyuk Cement factory,” Shashi said.

She lauded ACAI for organizing stakeholders dialogue with the theme “Adamawa Without Oil Money: Meeting The Challenges of Sustainable Development Through Agriculture and Solid Minerals Resources Development” , which she described as timely and assured the state government commitment to key in.

In his paper, “Economic Diversification through Solid Mineral Resources Development: The Adamawa State Prospects”, Prof. Saidu Baba, lamented the long years neglect of agriculture and solid minerals which used to be the mainstay of the nations economy.

“Why we are in recession is because the money we realized from oil sector was not utilized to develop other sectors like solid minerals and agriculture”, Baba said.

While noting that Adamawa has the mineral potentials to generate revenue, Baba said that SWOT analysis has proven that Adamawa has limestone, coal, gypsum, baryte, clays and granites potentials.

“It is therefore recommended that the state government should consider well-organized and coordinated investments in these minerals, advisably through joint venture programmes as is done in the oil and gas sector.”

In his remarks, the Convener of ACAI, Mallam Bashir Ahmad, said the annual dialogue was meant to serve as a platform for Adamawa citizens to come together and discuss challenges of good governance and sustainable development in the state, with a view to coming up with common terms as to surmounting them.

While noting the current recession and the dwindling monthly allocation from Federation Account, Ahmed said Adamawa, with a population of over three million, needed to diversify if it must meet its obligation to the electorate.

“We must create immediate alternative sources of revenues to fund our developmental programmes since monthly allocation, which comes mainly from oil money, can hardly even pay the monthly salaries,” Ahmad said.

http://guardian.ng/news/diamond-gold-mining-to-begin-in-adamawa/

SIR ANTHONY OLADIPO ADEGBITE (KJW) - A FORTHRIGHT NIGERIAN

By Ayo Osunloye

Not many people can be described as FORTHRIGHT but in the case of SIR ADEGBITE, forthrightness comes naturally. His third book published to mark his 92nd birthday left a legacy of his wealth of wisdom to benefit the young. The book entitled "Strategies For Success" is a blessing to all who will read it..

1. Blessed is the man

    That walketh not 

    In the counsel of the ungodly,

    Nor stand in the way of sinners,

    Nor sitteth in the seat of the scornful.

2. But his delight is 

    In the law of the Lord,

   And in His law doth he meditate

   Day and Night.

3. And he shall be 

   Like a tree planted

   By the rivers of waters,

  That bringeth forth

  His fruit in his season,

  His leaf also shall not wither,

 And whatsoever he doeth shall prosper.

Sir Anthony Oladipo Adegbite is the personification of the Psalmist's thoughts while the above words were committed to writing.

This man of great humor and literary ability, claimed in his own words. 

"I was conceived in Lagos but delivered in Shagamu on November 13, 1924". *(Man, Know Thyself" Autobiography and other Reflection of Sir (Elder) A.O. Adegbite Page 2).

This astute gentle man grew up in the Oshodi – Epetedo Area of Lagos Island. Born of Moslem parents but grew up a Christian taking the first name Anthony meaning "Priceless, praise worthy". He is another Anthony that has embodied the meaning of the name with the attendant honour.

I had my first encounter with him, while observing at a meeting, of the Christian Association of Nigeria (CAN) Lagos State Chapter called, to deliberate on the burial programmes for its then Secretary – General, Revd. T. A. Ajayi. It was at this meeting that I observed his quintessential parliamentary attributes. He is a gifted orator, unrepentant democrat and master at debates for progress, be it in the church, community and all walks of life. You may have your way but he would have his say.

Sir Adegbite stands forthright and unshakeable on the side of the good and the right way to go on any issue. He deploys his vast arsenal of wit, wisdom and anecdotes in the pursuit of his cause. Like Nelson Mandela "A good teacher can engage in a debate frankly and thoroughly, knowing that at the end he and the other side must be closer, and thus emerge the stronger. You don't have that idea when you are arrogant, superficial and uninformed".

Baba is humble,deep,knowledgeable,wise,experienced and of great understanding.

In the City Mission Church he was at various times the Senior Church Steward, Chairman Building Committee (for over 25 Years), Conference Treasurer of the Methodist Church Nigeria, Diocesan Officer, Circuit Officer, Senior Church Steward and Secretary of the Building Committee at Agbeni Methodist Cathedral Ibadan amongst several others. He is an accredited Lay Preacher of the Methodist Church Nigeria. Past National President, of the Men's Fellowship of the Methodist Church Nigeria, Officer of the order of Wesley (O.O.W.) and a Knight of John Wesley (KJW). He had represented the Methodist Church in various Ecumenical Associations. A recipient of various honours and awards; both in the church and ecumenical organisations.

He is one of the few people left in the Methodist Church that can speak the truth to authority. In his active days he fought many battles for the preservation of the Wesleyan heritage. The continuous and gradual erosion of the distinct Methodist flavour in our worship and liturgy has pitched him against many sloppy ministers who would rather import and impose the populist Nigerian Christ Apostolic Church doctrine or other Pentecostal fashion. Many a minster of the Methodist Church invoke the names of leaders of other denominations as if the leaders of the Methodist Church does not inspire them. This gradually tends to erode the confidence and faith of their parishioners in their church. Papa frowns at such indiscretion. 

Sir Adegbite is a strong and committed believer in Christ and in an undiluted Methodist doctrine which should be upheld, promoted and untainted by cross doctrinal affectations.

In the pre–Independence nationalist struggles, Sir Adegbite was a prominent political cadre who worked strenuously in the agitation and struggle for independence. He was in the vanguard of organising many political rallies and lectures through which the people were informed and enlightened on the need for independence and freedom. He was an associate of Chief Obafemi Awolowo, Chief Samuel Ladoke Akintola and Alhaji Ganiyu Dawodu. 

As an illustration, Chief S.L.A. Akintola was ushered back in to the political circuits of Lagos when he returned to Nigeria after completing his law studies in England at the instance of Sir Adegbite. He convinced him to deliver a lecture at the Glover Memorial Hall at Customs Street in Lagos. Papa in collaboration with his associates mobilized a huge crowd to the hall to herald the entrance of Nigerias greatest polemicist and political maverick to the country. Severally years later, when SLA was the Federal Minister of Labour, he was assigned to relieve the Minister of Communications who was out of office for a while. While familiarizing himself with the officials of the Ministry of Communication, he got to the desk of Sir Adegbite who he never knew was a civil servant! Chief Akintola exclaimed in his unique soprano voice "Mr. Adegbite, so you are here?!" It was said with such cadence that only the two nationalists understood the full import of the conversation while the colonial officer conducting him round was outflanked.

The political interventions and participations of Sir Adegbite were on the basis of the "Good of the People". He never sought to and did not benefit materially from politics. In contrast he used his affinity to uplift total strangers and people in genuine need of assistance. His greatest joy is to see the welfare of the people as the very aim of government and governance. 

He believes that the people must be organised for self and communal development. To him, “the glory of the king must be the welfare of the people".

While living in Lagos, he was a notable figure in the Adeniran Ogunsanya Community Development Association where he was the Chairman for several years. He was an opinion leader in Surulere Local Government and Lagos State.

Sir Adegbite was a victim of the military intervention in the polity. He was prematurely retired while on the Directorate Cadre of the Department of Posts and Telecommunication by the Murtala/ Obasanjo regime in 1975. The dislocation and regression foisted on the polity and the people by the military interregnum in Nigeria can only be imagined when Nigeria and its people are compared to countries of the same epoch and with their positions in world development. 

Baba was to weather the storm like the tree planted by the rivers of water that bringeth forth his fruit in his seasons, his leaf did not wither, and he prospered in his business undertakings even though he was not trained or prepared for the intrigues, hustle and bustle of business life.

Baba Adegbite's life had been like an oak in the desert providing shade, rest and succour to all whose path crossed his way. He is a man never wanting in words of comfort, advice, encouragement, reprimand or humour as the occasion demands. His oratory is bereft of guile, he does not call a spade by any other name, forthright, blunt, jovial with a command of English that takes the pain from the prick of a pin.

The various literary offerings of Sir Adegbite reveals his penetrating insight of the society by his revealing anecdotes, historical recalls, political tit – bits, cultural life of the various communities in which he socialised and the common place fables of his life and times.

This self made man passed the junior and senior Cambridge examinations as an external candidate taking tuition at two extra mural evening classes. The focus and hard work germinated at this early stage in life and the special grace of God saw him advancing both at work, church and community to a man of stature and reckoning.

Papa found his missing rib in Miss Elizabeth Roberts and they got married on February 9, 1950. The marriage was blessed with six children of three males and three ladies. Mama passed on in February 1997. Papa is a family man par-excellence who doted on his family. The vacuum created by mama's demise can only be imagined than felt. The abundant grace of God has continued to sustain Papa these last twenty years. Papa is blessed with daughters and sons by marriage and many grandchildren residing in different countries of the world.

In all said and done, Sir Adegbite comes out to me as an all rounder in all the callings of life. A good child, a dutiful student, a diligent worker, patriotic, responsible and compassionate citizen, a servant of the most high God both in the sanctuary and at the City Gate. He truly belongs to the pantheon of our heroes!

When Papa was ninety, I was penciled to propose the toast, but like everything written in pencil, it was smudged and the toast was proposed by another eminent 'son' of papa. When the event was reviewed with Papa, I held the view that God was preparing me to propose his toast at 95 or 100 years. Papa in his humility and jovial self requested me to lower my sight to an earlier milestone. I believe this is not the last toast to our illustrious and eminent father as the Lord will keep him beyond the century mark!

Ayo Osunloye an Architect and a former Church Steward at City Mission Methodist Church writes in from Lagos. He is also a Politician and he is the Lagos State Chairman of Afenifere Renewal Group (ARG)

The Caliphate Of Usman Dan Fodio

The Sokoto Caliphate was an independent Islamic Territorial jurisdiction in West Africa which was founded during the jihad of the Fulani War in 1809 by Usman dan Fodio. The Caliphate was however abolished when the British defeated the caliph in 1903 and put the area under the Northern Nigeria Protectorate.

Lagos wins ''Best Performing SUBEB'' Award

The effort of the Lagos State Government to improve the standard of education in Lagos through State Universal Basic Education Board has started to yield positive result as the Executive Chairman of SUBEB, Dr. Ganiyu Oluremi Sopeyin has emerged as the Best Performing Chairman in the South West while Team Lagos came third in the Inter-SUBEB Schools Debate Championship held recently in Minna, Niger State.

17 Year Old Nigerian Breaks Sporting Record in Indian University

Esther Ruby Daniel has become the foremost athlete at the Amity University, Haryana, India. The 200 level student from Akwa Ibom State, has won various medals in different sporting events in the University. During her very first month in the university, She won a silver medal at the All Indian Law Student University Game.