Equity is a common way to reward advisers when a young company has little cash, and I have no objection to it in principle. My concern is how often advisers receive shares on the basis of an informal conversation that nobody can explain clearly a year later, which is why I suggest agreeing the work first and the reward second.
An adviser who gives regular, hands‑on support is making a very different commitment from someone who makes a single introduction, and the terms should reflect that difference. They should also deal with the possibility that the engagement ends early, and they should say exactly what the adviser receives, including anything the adviser must pay to become a shareholder.
Agree the work before the award
The engagement terms should describe what the adviser will do and how often they will be available. For introductions in particular, the company needs to decide what earns the equity, whether it is making a qualifying introduction or the investment or deal actually closing. The second depends on someone else's decision, and both sides should understand that before relying on it.
It is also worth confirming whether the adviser is engaged personally or through their own company, because that decides who promises the services and who receives the equity. The adviser's other commitments should be checked too, since an employer or a fund they work with may restrict outside roles or the use of information.
An adviser's title should match the role they actually hold. Joining the board, or having authority to bind the company, needs its own appointment and approvals, and the people the adviser deals with on the company's behalf should understand what the role is, especially if the adviser attends meetings or makes introductions for the company.
Be precise about the equity
The terms should say which company is issuing the equity, which matters where the team is employed by a Nigerian company and the shares are in a foreign parent. They should also say whether the adviser receives shares now or an option to buy shares later, and if the reward takes some other form, such as a cash bonus linked to the company's value, how and when it is paid.
Any percentage should be converted into a number of shares, using an agreed share count and date, and the terms should say whether the percentage is measured against issued shares or on a fully diluted basis that includes convertibles and the option pool. A fixed number of shares will be diluted by later rounds in the normal way, whereas a promise to maintain a fixed percentage is a much larger commitment, and I advise founders to avoid giving one.
An option comes with an exercise price and conditions, so the adviser should be told what exercise will cost and when it can happen. I explain how options work in what your employee option grant means, and how to record the commitment in making sense of the company's cap table.
Let the award follow the work
Time‑based vesting connects the award to continued service, while milestone vesting connects it to a particular result. For milestones, the terms should explain how achievement is checked and who decides if there is a disagreement, so that the earned portion can be worked out if the engagement ends before the work is finished.
For time‑based awards, the terms should set a start date and any cliff, and say what happens if the adviser stops engaging or is unavailable for a long period. With a new relationship, I often suggest a small first grant with a review after six months, which usually works better than a large grant on the first day.
When the engagement ends, the terms decide what has been earned and what stops vesting. They also need to deal with any exercise deadline and with shares already issued, and if a leaver definition changes what the adviser receives, the decision process should be set out in the original agreement.
Fundraising and confidential information
Equity given for bringing in investors needs real care. Paying someone for raising money, especially as a percentage of the amount raised, can fall within securities rules under the Investments and Securities Act 2025 and under the rules of other countries where investors are approached, and the analysis depends on what the person is doing even if they are paid in shares.
The company should agree what information the adviser receives and how they may use it, including whether the adviser's own team can see it. Where the adviser works with competing companies, there should be clear boundaries around conflicts, and the company should make sure it does not end up receiving confidential information the adviser owes to someone else.
If the adviser creates material for the company, the agreement should assign it to the company and give the company permission to use any existing material of the adviser's that it relies on. Those rights work alongside the confidentiality terms I discuss in when to use a confidentiality agreement.
Approve the award and plan for the end
The award needs the board and shareholder approvals required for the chosen structure, and it must fit within the option plan or the company's authority to issue shares. Investor consent and pre‑emption rights should be checked before the board is asked to approve it, and the tax and accounting consequences for the company and the adviser should be considered, particularly if the adviser is based abroad.
The signed engagement and grant should be kept with the approvals, and the award should be recorded in the same register as employee options. Verbal promises still waiting for formal approval should be included and resolved, because a single register for every equity commitment is the simplest way to avoid promising the same shares twice.
When the engagement ends, the company should send the adviser a statement of what has been earned and any remaining steps, with their deadlines. Shares already held keep their rights and restrictions, and the statement should be filed with the record of the engagement ending.
This article is general information and not legal advice. For guidance on your specific circumstances, speak with us directly.