Share transfers in Kenya are a critical part of managing company ownership and investment. Whether you’re bringing in a new investor, exiting the business, transferring shares to family, or restructuring your company, knowing how to transfer shares legally and efficiently is essential. Many business owners underestimate the importance of following due process—until they’re stuck trying to update a CR12 or facing disputes from other shareholders.
This article breaks down the legal process of share transfers in Kenya under the Companies Act, 2015. This guide aims to help private company owners, directors, and investors gain clarity on executing compliant and dispute-free share transfers.
Table of Contents
- What Is a Share Transfer?
- Legal Framework: Share Transfers in Kenya
- Why Do Share Transfers Occur?
- Who Can Transfer Shares and to Whom?
- The Share Transfer Process in Kenya (Step-by-Step)
- Tax and Regulatory Implications
- Share Transfers When a Shareholder Dies
- Common Mistakes in the Share Transfer Process
- Best Practices for Share Transfers
- FAQs: Share Transfers in Kenya
- Safeguard Share Ownership and Minimise Legal Risks
What Is a Share Transfer?
A share transfer is the legal process of moving ownership of shares from one party (the transferor) to another (the transferee). This may be voluntary (e.g. selling shares), involuntary (e.g. inheritance), or corporate (e.g. internal restructuring).
Share transfers apply to:
- Private limited companies (more restrictions)
- Public companies (more open but subject to Capital Markets regulations)
Legal Framework: Share Transfers in Kenya
The transfer of shares in Kenya is governed by:
- The Companies Act, particularly Sections 476–486.
- The Company’s Articles of Association guide how shareholders can transfer their shares and to whom they can transfer them.
- The Stamp Duty Act applies during the assessment and payment of stamp duty.
- The Income Tax Act provides for the applicability of and rate of capital gains tax.
- The Capital Markets Act and relevant Regulations apply when publicly listed companies issue the shares in question.
The Articles of Association take precedence in a private company and often impose restrictions such as:
- Pre-emptive rights (other shareholders must be offered the shares first)
- Board approval before a transfer is valid
- Specific procedures or forms to be followed
Why Do Share Transfers Occur?
Share transfers happen for a range of strategic, personal, or legal reasons. A shareholder may want to exit the company and sell their stake, bring in a new investor, restructure the company for succession planning, or transfer shares to family members as part of estate planning. In some cases, transfers are involuntary, such as when a shareholder dies or is removed under the Articles. For private companies, the reasons often relate to ownership control and capital restructuring, while in public companies, transfers frequently occur as part of regular trading activity or investment diversification. Understanding the reason behind the transfer helps determine the legal approach, the parties involved, and the tax or regulatory considerations that follow.
Who Can Transfer Shares and to Whom?
In most private companies, a shareholder can transfer shares:
- To another existing shareholder
- To a third party who is not a shareholder, with the approval of the board and or other shareholders. A third party may be a person or a company.
- To a family member or other relative (still subject to restrictions)
Public company shares are generally transferable freely, unless otherwise stated by law or internal policy.
The Share Transfer Process in Kenya (Step-by-Step)
- Review the Articles of Association
Confirm if there are any restrictions or procedures you must follow before initiating the transfer. - Send a Transfer Notice
If required, the transferor must notify the company or other shareholders of their intent to transfer shares, especially if pre-emptive rights apply. - Prepare the Share Transfer Instrument
Complete and sign the Form of Transfer. This must be executed by both the transferor and transferee. - Assess and Pay Stamp Duty
Stamp duty is calculated at 1% of the nominal value of shares being transferred. This must be paid through KRA, and the transfer form stamped. - Board Resolution and Approval
The board must formally approve the share transfer through a board resolution and authorise the issuance of new share certificates. - Update the Company’s Register of Members
Once approved, the company secretary updates the statutory register to reflect the new shareholder. - Issue New Share Certificates
A new certificate is issued to the transferee, while the transferor’s certificate is cancelled or updated. - Update the CR12
File a request with the Companies Registry for an updated CR12 showing the new shareholding.
Tax and Regulatory Implications
- Stamp Duty: Mandatory at 1% of the nominal share value. Failure to pay invalidates the transfer.
- Capital Gains Tax (CGT): If the transferor makes a gain, CGT may apply. Ensure tax compliance with KRA.
- Transfer Pricing: Where shares are transferred between related parties, KRA may review the transaction under transfer pricing regulations.
Share Transfers When a Shareholder Dies?
When the shareholder of a company dies, their shares form a part of their estate and must be distributed according to their will or under the laws of intestate succession.
Typically, the share transfer process will follow the following process:
- Obtain a Grant of Probate or Letters of Administration listing the shares and who will inherit them.
- Determine whether the heir(s) can hold the shares or must sell them based on the Articles of Association of the company.
- Transfer the shares to the heir(s) or other person.
- Pay the stamp duty or obtain an exemption from the Commissioner of Taxes.
- Update the CR12.
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Common Mistakes in the Share Transfer Process
- Failing to check the Articles of Association before initiating a transfer
- Not obtaining board or shareholder approvals
- Omitting stamp duty payment or failing to get documents stamped
- Not updating the Register of Members or CR12 after the transfer
- Skipping legal review or due diligence before accepting a transfer
Best Practices in Share Transfers
- Always conduct a full check of your company’s internal rules, i.e. the Articles of Association.
- Document the Transfer Process properly, for example, by drafting and signing a Sale Agreement where applicable.
- For the Transferor: File and pay your Capital Gains Tax
- For the Transferee: Pay stamp duty early to prevent the transaction from being voided and to avoid penalties and interest.
- Ensure the CR12 is updated to reflect new ownership
FAQs: Share Transfers in Kenya
1. Can I transfer shares to a family member?
Yes. But the company’s Articles and the stamp duty rules still apply.
2. How long does a share transfer take?
With all documents in order, it typically takes 7–21 days, depending on company complexity.
3. Do I need to notify the Companies Registry immediately?
No, but the CR12 must be updated once the transfer is completed and approved.
4. Is capital gains tax always payable?
Not always. If no gain is made or the transfer is exempt under the Income Tax Act, CGT may not apply. You may also apply for exemption where applicable.
5. Can shares be transferred without board approval?
Not in most private companies. The board must approve, and the Articles often require it.
Safeguard Share Ownership and Minimise Legal Risks
Share transfers may seem procedural, but the legal and financial risks of doing it wrong are real. Directors and shareholders should treat each transfer as a regulated transaction that must comply with Kenyan law, company Articles, tax obligations, and record-keeping requirements.
At Wacu Mureithi & Co. Advocates, we assist companies with reviewing Articles, preparing and stamping transfer instruments, securing approvals, and filing CR12 updates. We also advise on tax and succession implications of share transfers. Contact us today to safeguard your transaction from start to finish.