Transferring Company Shares in Kenya

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(a) Introduction
A share is a single unit of ownership in a company and it is transferred between the transferor and transferee through a share transfer document. Section 323 of the companies act defines shares as the personal property of the shareholder thus the registration of a deed of transfer of shares confers upon the transferee’s proprietary rights over shares in a company.

Shares can be transferred normally through a deed of transfer or by operation of law through transmission in the case of death or bankruptcy.

The following laws govern the transfer of shares:

  1. Companies Act 2015
  2. Companies General Regulation 2015
  3. Law of Succession Act
  4. Model Articles for Private Limited Companies

(b) Normal Transfer of Shares
This is guided by the company’s Articles of Association and it takes precedence over the Company’s Act due to party autonomy.

  1. The shareholders hold a meeting to approve the share transfer
  2. A deed is prepared for transaction where it is signed by both parties, the transferor and transferee. It is then witnessed by a competent person.
  3. The parties fill out Form D which is then signed by the company secretary.
  4. It is pivotal to have a share purchase agreement which includes the description of the shares and their nominal value.
  5. The Deed, Form D and minutes are then filed with the registry and have the stamp duty assessed and paid.
  6. A copy of company’s interim annual returns is filed to support transfer request.=
  7. Copies of the assessed and franked documents from the land registry are then filed with the company’s registry on the e-citizen platform. The company will then make changes and update the company’s records.

In summary, the transfer of shares in Kenya involves several legal and procedural steps. Here is an overview of the process:

  1. Agreement: The transfer of shares typically begins with an agreement between the seller (transferor) and the buyer (transferee). This agreement should outline the terms and conditions of the share transfer, including the number of shares, the purchase price, and any other relevant details.
  2. Due Diligence: Both parties may conduct due diligence to verify the accuracy of the shares being transferred, the company’s financial status and any potential legal or financial liabilities.
  3. Board Approval: The company’s board of directors must approve the transfer of shares. This approval is usually given during a board meeting, and the minutes of the meeting should record the decision.
  4. Stamp Duty: Stamp duty is a tax imposed on certain legal documents, including share transfer documents. The stamp duty must be paid on the share transfer. The stamp duty Act makes provisions on the amounts to be paid which is 1% of the share value.
  5. Share Transfer Form: The transferor and transferee should complete and sign the share transfer form. This form is typically provided by the company and must include details such as the names of the parties, the number of shares transferred, and the consideration paid.
  6. Submit Documents to the Company: The completed share transfer form, along with any supporting documents (such as the board resolution and proof of payment of stamp duty which is 1% of the share value), should be submitted to the company’s secretary and registrar.
  7. Company’s Approval: The company will review the share transfer documents and, if everything is in order, approve the transfer. The company may have specific procedures and timelines for this process.
  8. Update Company Records: Once the transfer is approved, the company will update its share register to reflect the new ownership of the shares.
  9. Share Certificates: New share certificates may be issued to the transferee to confirm their ownership of the shares.
  10. Capital Markets Authority (CMA): If the company is listed on the Nairobi Securities Exchange (NSE), you may need to inform the CMA of the share transfer, as there are regulations that govern share transfers for publicly traded companies.

(c) Transmission of shares held individually

The transmission of shares is regulated by the subject company’s articles of association and in the absence thereof, it is regulated by Regulation 8(2) of the Companies (General) Regulations, 2015 which provides for the Model Articles for Private Companies Limited by shares.

Clause 65 of the Model Articles for Private Companies Limited by Shares provides as follows:

1. If a member dies, the company may recognize only the following person or persons as having any title to a share of the deceased member:
a. if the deceased member was a joint holder of the share, the surviving holder or holders of the share; and
b. if the deceased member was the sole holder of the share, the legal personal representative of the deceased member.

(d) Documents required for Transmission of shares
The following documents should be lodged at the Companies registry in order to effect the transfer of shares by transmission to a beneficiary: –

  1. Certified copy of the Death certificate of the deceased shareholder;
  2. Certified copy of Identification card or surrender form of the deceased shareholder;
  3. Certified copy of the grant of letters of administration in the event the shareholder died intestate or certified copy grant of probate in the event the shareholder died testate;
  4. Certified copy of Certificate of confirmation of Grant from the High Court.
  5. Certified copy of the Identity card of the personal representative and/or administrator;
  6. Certified copy of the Identity card of the Beneficiary;
  7. Original share certificates of the subject companies; and
  8. Duly filled transfer of shares form.

If you need assistance transferring shares, you can contact Bond Advocates LLP.