Transfer Of Shares in Kenya

Transfer Of  Shares In Kenya

Transfer of share(s) and change of directorship of a Company is a process normally lodged at the Registry on behalf on the directors of a company by a Certified Secretary of Kenya (CS). Transfer Company Shares in Kenya simplified.

A private limited company’s ownership is decided by the Company’s shareholding. The share of the private limited company would need to be transferred in order to accept new investors or transfer ownership of the company. In this article we shall be looking on how to transfers shares of private limited companies.

In Kenya the following is the procedure used in the transfer of shares as stipulated by the Companies Act 2015.

Form of transfer of shares Kenya, Restriction By Articles Of Association

 

Similar to a partnership firm, a private limited company is regarded as a “closed corporation” of its members. As a result, the Articles of Association may place restrictions on the transfer of shares in a Private Limited Company. Therefore, before starting the share transfer process, the Company’s Articles of Association must be studied.

There are two forms of restriction on the rights of shareholders to transfer their shares:

• Pre-emption rights: A shareholder must first offer his shares to other current members of the private limited company at a price set by the directors or the company auditor before selling any or all of them. Based on the formula or technique specified in the articles of association, the value of the shares can be calculated. Shares of the Company may be freely transferred to a third party if no existing shareholder is interested.
• Powers of directors to decline: Directors may have the authority to decline the registration of a share transfer in certain situations that are outlined in the Articles of Association.

The only restrictions that are regarded as legally binding are those found in the articles of association. The corporation and the shareholders are not bound by any private agreements made by the shareholders. Furthermore, only the Articles of Association have the authority to ban share transfers. A private limited company’s right to transfer shares cannot be interpreted as a complete restriction or ban on share transferability.

How To Transfer Shares In A Private Limited Company

• The company’s Memorandum and Articles of Association (for organizations whose directors have not decided to adopt the sample by laws as required by the Company’s Act 2015)
• A Copy of the Certificate of Incorporation or registration
• The company must have submitted all of its annual returns to the registrar of companies for the prior years.
• Furthermore, the company must submit returns for part of the current remaining year.

• Obtain the meeting minutes from which the resignation (of the departing director) and appointment (of the incoming director) were considered.
• submit CR 19 (notice of special/ordinary resolution to be lodged with registrar as required by the Companies Act)

Requirements for Incoming Director(s)

 

• Attain the approval of the person or people being appointed as directors (s).
• Acquire the new director’s residential address and submit a CR 8 (Notice of Residential Address/Change of Address of Director(s) of Company) form.
• Attain copies of the new director’s PIN, national identification card, passport, and passport-size photo.
• File CR 6 (Notice for appointment of new director(s) and their particulars.

Requirements for Outgoing Director

 

• Acquire the departing director’s resignation letter in writing.
• Submit CR 9 form (Notice of cessation of office of directors)
• Acquire an affidavit indicating that the person is willingly resigning as director(s) and transferring your interest to another director(s).

Transfer of Shareholding

 

• The parties involved i.e., the outgoing director(s)/transferor(s) and incoming director(s)/transferee(s) should sign a transfer deed (Form of transfer).
• After determining the stamp duty, the company secretary will have the transfer lodged (registered) with the Registrar of Companies.

Confirmation of the Transfer

 

Once the changes have been affected successfully, the company Secretary requests for the new list of directors(s) and their shareholding by applying for the CR 12 form online through the e-citizen portal.

Commencement Of The Share Transfer Procedure

 

In order to commence the transfer of shares the following steps must be followed:

• Step 1: Review the AOA: The Private Limited Company’s articles of association must be evaluated, and any restrictions must be resolved.
• Step 2: The shareholder must notify the company’s director in writing of their intention to transfer their shares.
• Step 3: Determine the price at which the Company’s shares will be initially sold to its current shareholders in accordance with the Articles of Association. This price is often set by the company’s board of directors or an accounting firm.)
• Step 4: The remaining shareholders must then be made aware of the availability of shares, the deadline for buying, and the offering price.

Shares must be allocated to current shareholders if any of them approach the company to buy shares. If the current shareholder is not interested or there are extra shares available, they can be transferred to an outsider.

The following procedure must be followed for the transfer of shares to be successful:

1: Acquire a share transfer deed in the necessary format.

This form can be obtained from the Business Registration Service portal online, downloaded and then properly filled.

2: Execute the share transfer deed when the Transferor and Transferee have properly signed it.

After both the transferor and transferee have duly signed the share transfer deed, it can be commissioned where necessary, if no need then taken back to the Registry or uploaded on the e-citizen portal for approval.

 3: Stamp the transfer deed form for shares Kenya in accordance with the Stamp Duty Act. Share transfer deed form and stamp duty on transfer of shares in Kenya should be duly completed.

If there is a requirement to pay stamp duty ensure it is paid.

4: Have a witness sign the share transfer deed along with their name, address, and signature.

For execution purposes the transfer deed has to be signed by a witness each one for the Transferor and the Transferee and indicate their name and address as well.

 5: Deliver the transfer deed to the company along with the share certificate or letter of allocation.

After the execution of the documents is done, the transfer deed, share certificate and letter of allocation are taken to the Registrar of Companies or the documents are attached(uploaded) on the e-citizen portal for approval by the Registrar.

6: The company must review the paperwork and, if accepted, issue a new share certificate in the transferee’s name.

Conclusion

 

The process of share transfer or change of directorship in a private limited company is not as tedious as it may seem, once you have the necessary forms and documents executed the process is very seamless. 

FAQs

Can shares be transferred in Private Limited Company?

 

The corporation and the shareholders are not bound by any private agreements made by the shareholders. Furthermore, only the Articles of Association have the authority to ban share transfers. A private limited company’s right to transfer shares cannot be interpreted as a complete restriction or ban on share transferability. How to transfer shares on e-citizen explained

How are shares transferred in Kenya?

 

To transfer the shares to the beneficiary as the transferee, the personal representative, acting as the transferor, must sign a deed of transfer of shares.

What documents are required to transfer shares?

 

Documents Required for Transfer of Shares are:

• Original Share Certificate of share to be transferred.
• Certificate of Stamp duty payment (Franking) on issue of share certificate.
• Valuation and the share transfer agreement.
• Share transfer form duly signed by the parties.
• ID and address proof of the transferor and transferee.

What are the restrictions on transfer of shares?

 

The restriction essentially represents the idea that if a private company shareholder wants to sell any shares, the current shareholders have a right to be offered those shares first, and that if they decline or don’t act within a certain amount of time, the shares can be sold to a third party.

Do share transfer forms need to be witnessed?

 

A witness is required for transfers involving individual shareholders, while a company’s common seal is necessary for transfers involving corporate entities. Individual shareholders who reside outside of the country may designate a proxy to sign on their behalf.