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Director Profit Sharing Agreement

Director Profit Sharing Agreement Template for Nigeria

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Key Requirements PROMPT example:

Director Profit Sharing Agreement

"I need a Director Profit Sharing Agreement for our Lagos-based fintech startup, where we want to offer our new Technical Director 5% of annual net profits, with quarterly payments starting from March 2025 and including specific KPIs related to our technology platform development."

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Document background
The Director Profit Sharing Agreement is a crucial document for Nigerian companies seeking to establish clear, legally-compliant arrangements for sharing profits with their directors. This document is particularly relevant in the context of Nigerian corporate governance, where there is increasing emphasis on transparency and accountability in executive compensation. It addresses requirements under CAMA 2020, the Nigerian Code of Corporate Governance 2018, and relevant tax laws. The agreement is typically used when companies want to incentivize director performance through profit sharing, ensure regulatory compliance, and establish clear mechanisms for calculating and distributing profits. It includes essential provisions for tax compliance, performance metrics, and protection of company interests, while aligning with Nigerian corporate law requirements.
Suggested Sections

1. Parties: Identification of the Company and the Director entering into the agreement

2. Background: Context of the agreement, director's role, and basis for profit sharing arrangement

3. Definitions: Key terms including 'Profit', 'Financial Year', 'Profit Share', 'Board', etc.

4. Appointment and Term: Confirmation of director's position and duration of profit sharing arrangement

5. Calculation of Profits: Method of calculating distributable profits and accounting principles to be applied

6. Profit Share Entitlement: Formula or percentage for calculating director's profit share

7. Payment Terms: Timing, method, and conditions for profit share payments

8. Tax Provisions: Responsibility for tax payments and withholding requirements

9. Confidentiality: Protection of company's confidential information and trade secrets

10. Director's Obligations: Key responsibilities and performance expectations

11. Termination: Circumstances and process for ending the profit sharing arrangement

12. General Provisions: Standard clauses including governing law, notices, and entire agreement

Optional Sections

1. Non-Competition: Restrictions on director's involvement with competing businesses - relevant for executive directors

2. Performance Criteria: Specific KPIs or conditions that must be met to qualify for profit share - useful for performance-linked arrangements

3. Clawback Provisions: Company's right to recover payments in case of misconduct or misstatement - important for listed companies

4. Group Company Provisions: Additional terms for directors serving multiple companies within a group structure

5. Corporate Governance Compliance: Specific provisions for listed companies or regulated industries

6. Dispute Resolution: Alternative dispute resolution mechanisms - recommended for high-value arrangements

Suggested Schedules

1. Schedule 1 - Profit Calculation Methodology: Detailed formula and accounting principles for profit calculation

2. Schedule 2 - Payment Schedule: Timing and structure of profit share payments

3. Schedule 3 - Performance Metrics: Detailed KPIs and measurement criteria if applicable

4. Appendix A - Board Resolution: Copy of board resolution approving the profit sharing arrangement

5. Appendix B - Tax Compliance Certificate: Director's tax clearance certificate as required by Nigerian law

6. Appendix C - Company's Latest Audited Accounts: Reference point for profit calculations

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Linkedin in social icon imageX social icon image
alex.den.21@genieai.co
Relevant legal definitions
Accounting Period
Affiliate
Annual Accounts
Applicable Law
Auditors
Board
Board Resolution
Business Day
CAMA
Company
Confidential Information
Corporate Governance Code
Director
Effective Date
Financial Year
Good Industry Practice
Gross Profit
Group
Group Company
Key Performance Indicators
Management Accounts
Net Profit
Parent Company
Performance Criteria
Profit Share
Profit Share Payment Date
Qualifying Profits
Related Party
Relevant Period
SEC
Service
Subsidiary
Tax Authority
Term
Territory
Termination Date
Threshold Amount
Working Hours
Clauses
Interpretation
Appointment
Term and Duration
Profit Calculation
Payment Terms
Performance Requirements
Director's Duties
Board Obligations
Confidentiality
Non-Competition
Non-Solicitation
Tax Compliance
Record Keeping
Audit Rights
Corporate Governance
Regulatory Compliance
Information Rights
Representations and Warranties
Indemnification
Force Majeure
Termination
Consequences of Termination
Dispute Resolution
Governing Law
Notices
Assignment
Variation
Waiver
Severability
Entire Agreement
Third Party Rights
Counterparts
Relevant Industries

Financial Services

Manufacturing

Oil and Gas

Technology

Telecommunications

Real Estate

Professional Services

Healthcare

Retail

Construction

Agriculture

Mining

Entertainment

Education

Relevant Teams

Legal

Finance

Human Resources

Corporate Secretariat

Compliance

Board Secretariat

Risk Management

Internal Audit

Corporate Governance

Relevant Roles

Chief Executive Officer

Managing Director

Executive Director

Non-Executive Director

Finance Director

Technical Director

Operations Director

Commercial Director

Regional Director

Group Director

Independent Director

Board Chairman

Industries
Companies and Allied Matters Act (CAMA) 2020: The primary legislation governing company operations in Nigeria, including directors' duties, responsibilities, and remuneration structures
Companies Income Tax Act: Regulates corporate taxation and tax treatment of profit distributions to directors
Personal Income Tax Act: Governs the taxation of individual income, including directors' profit shares and benefits
Investment and Securities Act 2007: Regulates securities trading and corporate governance matters, particularly relevant if the company is publicly listed
Nigerian Code of Corporate Governance 2018: Provides guidelines on corporate governance practices, including director compensation and profit sharing arrangements
Central Bank of Nigeria (CBN) Guidelines: If the company is in the financial sector, CBN guidelines on executive compensation must be considered
Labour Act: While directors are not typically employees, this may be relevant for executive directors who also have employment contracts
Finance Act (Latest applicable version): Contains updates to various tax laws that might affect profit sharing arrangements
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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