Introduction
Share transfer is a fundamental aspect of corporate governance and business restructuring in Kenya. Whether you are bringing in new investors, exiting a business, or restructuring family wealth, understanding the legal and procedural nuances is critical.
At Njaga & Co Advocates LLP, we frequently get questions regarding the movement of shares. This guide outlines the legal framework, processes, and tax implications of share transfer in Kenya under the Companies Act, 2015.
What is a share in Kenyan law?
A share is a unit of ownership in a company that confers proprietary and membership rights, including voting rights, dividends, and a share in surplus assets on winding up, subject to the Articles. Under the Companies Act, 2015, shares are treated as personal property and are transferable in the manner provided in the company’s Articles of Association and the Act.
Who is a Shareholder?
A shareholder (or member) is an individual or corporate body whose name is entered in the company’s Register of Members. Upon incorporation, the subscribers to the Memorandum of Association are the first shareholders. Subsequently, anyone who agrees to become a member and whose name is entered in the Register of Members becomes a shareholder. Evidence of title to shares is usually through a share certificate, which under the Companies Act is prima facie evidence of ownership unless proved otherwise.
What are the Types of Share Transfer in Kenya?
There are two primary modes of moving shares from one person to another:
- Voluntary Transfer: This is a transaction where a shareholder voluntarily sells or gifts their shares to another person. It involves a contract and a transfer deed.
- Transmission of Shares: This occurs by “operation of law.” It is involuntary and happens when a shareholder dies, becomes bankrupt, or (if a company) goes into liquidation. The shares “transmit” to the personal representative, trustee, or liquidator
What is the legal framework for share transfer in Kenya?
Several statutes and instruments form the legal framework for share transfer in Kenya. They include: –
- The Companies Act, 2015: Specifically, Sections 499-503 (Registration of Transfers) and Section 323 (Nature of Shares).
- The Companies (General) Regulations, 2015: Provide the Model Articles which regulate pre-emption rights (rights of existing shareholders to be offered shares first).
- The Stamp Duty Act (Cap 480): Governs the tax payable on the share transfer instrument (deed). It imposes a stamp duty of 1% on the value/consideration of shares transferred, payable to the Kenya Revenue Authority (KRA) to validate the instrument of transfer.
- The Income Tax Act (Cap 470): Governs Capital Gains Tax (CGT). The rate of tax is 15% of the net gain
- The Law of Succession Act: Governs transmission upon death.
What is the Process for Ordinary Share Transfer in Kenya?
For unlisted private companies and voluntary transfer, the typical share transfer process is as follows.
- Review the company’s Articles and shareholders’ agreements and pre-emption rights: Confirm any restrictions, pre-emption rights (meaning shares must first be offered to existing shareholders before being sold to an outsider), director approval requirements, lock-in periods, and valuation mechanisms before committing to a transfer.
- Board Approval: The Board of Directors must meet and pass a resolution approving the transfer. Under the Companies Act, directors of private companies have the discretion to refuse to register a transfer if it violates the Articles.
- Execution of Instrument of Transfer: The Transferor (seller) and Transferee (buyer) must execute a Share Transfer Form (Form J30). The transfer instrument must be signed by both parties to be valid.
- Tax Assessment & Payment: The transfer instrument must be presented to the Kenya Revenue Authority (KRA) or the Collector of Stamp Duty. Stamp Duty is assessed and paid.
- Registration: Once the duty is paid, the company secretary or the director applies to the Registrar of Companies through the eCitizen platform, who, once confirm compliance, updates the Register of Members, and cancels the old share certificate to issue a new one to the buyer. Note: The transfer is technically complete when the new name is entered in the Register of Members, and a new certificate is issued to the new shareholder.
What documents are needed for an ordinary share transfer?
The specific documentation may vary by transaction size and sector, but typically includes the following:
- Duly executed instrument of transfer (share transfer form).
- Share sale/transfer agreement capturing commercial terms and conditions.
- Original share certificates for the shares being transferred or a statutory declaration/indemnity for lost certificates.
- Board resolutions approving the transfer and authorizing the updating of the register and issuance of new certificates.
- Proof of stamp duty payment and electronic stamp endorsement from KRA.
- Know-Your-Customer (KYC) documents for transferee (ID/passport, PIN, address, contact details) and, where applicable, corporate documents for corporate transferees.
- Updated register of members and, if required, updated CR12 from BRS
What are the Tax Implications of Share Transfer?
There are two main taxes to consider:
- Stamp Duty: Payable by the Transferee (Buyer). The rate is 1% of the consideration (price paid) or the market value of the shares, whichever is higher.
- Capital Gains Tax (CGT): Payable by the Transferor (Seller). This is a tax on the profit made from the sale. As of 2025, the rate is 15% of the net gain (Selling Price minus Acquisition Cost).
Note: Transfers between spouses or to immediate family members may sometimes be exempt from CGT, subject to specific conditions in the Income Tax Act
What are the Tax Implications of Share Transfer?
There are two main taxes to consider:
- Stamp Duty: Payable by the Transferee (Buyer). The rate is 1% of the consideration (price paid) or the market value of the shares, whichever is higher.
- Capital Gains Tax (CGT): Payable by the Transferor (Seller). This is a tax on the profit made from the sale. As of 2025, the rate is 15% of the net gain (Selling Price minus Acquisition Cost).
Note: Transfers between spouses or to immediate family members may sometimes be exempt from CGT, subject to specific conditions in the Income Tax Act
How does the transfer of shares by transmission work in Kenya?
Transmission is a change of share ownership by operation of law (not by voluntary transfer). The Companies Act expressly preserves the company’s power to register a person whose right to shares is transmitted by operation of law.
Typical scenarios:
- Death of a shareholder – shares pass to personal representatives/administrators under the Law of Succession Act and the Articles.
- Bankruptcy – shares vest in the trustee in bankruptcy as per the insolvency law.
- Mental incapacity – a manager/guardian may be recognized in accordance with court orders and relevant law.
Key features of transmission:
- The company registers the personal representative as the holder or transfers to a beneficiary on production of appropriate grants and documents, without needing a standard instrument of transfer executed by the deceased or bankrupt shareholder.
- Board approval is still required, and Articles may give directors discretion regarding registration and timing.
What documents are needed in a share transmission?
The documentation for transmission depends on the reason for transmission, but typically includes the following.
- For the death of a shareholder:
- Certified copy of Death Certificate.
- Grant of Probate (where there is a valid will) or Grant of Letters of Administration (intestacy) issued by the Kenyan court or resealed foreign grants, as appropriate.
- Request a letter from the personal representative requesting registration of transmission and, where applicable, subsequent transfer to beneficiaries.
- Original share certificates and any company forms prescribed by the Articles.
- For bankruptcy/insolvency:
- Court order or bankruptcy order and appointment/recognition of a trustee in bankruptcy or a liquidator.
- Supporting company resolutions and updated register entries.
- For incapacity or other operation-of-law events:
- Court orders appointing a manager/guardian or other relevant legal instruments.
Common mistakes in share transfer in Kenya
Several recurring mistakes expose parties to invalid transfers, tax penalties, shareholder disputes, or regulatory issues.
- Ignoring Articles of Association and shareholders’ agreements, especially pre-emption rights, drag/tag provisions, and consent requirements.
- Failing to pay stamp duty or stamping late, rendering instruments defective, and attracting penalties.
- Not updating the register of members or BRS/CR12, leading to discrepancies between internal records and official registries.
- Poor valuation and inadequate documentation, which complicate CGT calculations and can trigger KRA queries.
- Overlooking minority protection, marital/succession interests, or cross-border issues in family businesses and investment structures.
- Weak documentation (no SSA, no board minutes, missing signatures/authority, poor audit trail)
What are the best practices for clean, dispute-proof share transfers?
Adopting best practices reduces risk and ensures enforceable, tax-compliant transfers.
- Conduct legal and tax due diligence on the company, shareholder relationships, and existing agreements before signing the sale documents.
- Ensure clear, written share sale/transfer agreements with warranties, conditions precedent, dispute resolution, and confidentiality clauses.
- Strictly comply with Articles on pre-emption, consents, valuation, and timelines; update Articles if the current framework is commercially impractical.
- Pay stamp duty and CGT within the required timelines and keep comprehensive tax records and valuations.
- Update the register of members, issue new share certificates promptly, and obtain updated CR12 for lenders, investors, and regulators.
- Engage professional company secretaries, tax advisers, and advocates to structure complex or high-value transfers, especially in regulated sectors.
FAQs on share transfer in Kenya
- Can a private company refuse to register a transfer?
Yes. Under the Model Articles and Section 498, directors can refuse to register a transfer if it breaches the Articles (e.g., selling to a competitor or bypassing pre-emption rights), provided they give notice of refusal within 2 months. - How long does a share transfer typically take?
Timelines depend on how quickly parties agree terms, complete KYC, pay stamp duty, and secure board and BRS approvals. For straightforward private company transfers, a well-managed process can often be concluded within 2–6 weeks, excluding complex regulatory approvals. - Is stamp duty always payable on share transfers?
Yes, stamp duty at 1% is generally payable on transfer of shares unless a specific statutory exemption applies (for example, certain group restructurings or approved reliefs).
Unstamped instruments may be inadmissible in court and can attract penalties and interest. - If a shareholder dies, can the executor transfer shares?
Yes. A transfer instrument for a deceased member’s shares can be made by the executor/administrator and is effective even if the executor or administrator is not a member. - Are gains from share transfers subject to Capital Gains Tax?
Yes. CGT at 15% applies to gains from the transfer of shares, except under the given exemptions. The seller must file and pay CGT to KRA within 30 days of transfer. - Can shares be transferred as a gift?
Yes, shares can be gifted, but the transfer must still comply with Articles, be properly documented, and stamped. It may still have CGT and other tax implications depending on circumstances and exemptions. - What if the original share certificate is lost?
The Transferor must sign a Letter of Indemnity and an Affidavit confirming the loss, and request that the company issue a duplicate for the transfer.
How Njaga & Co. Advocates LLP Can Assist
At Njaga & Co Advocates LLP’s Corporate & Commercial Law department, we specialize in corporate and commercial law. We can assist you by:
- Drafting and reviewing share transfer agreements
- Advising on tax and stamp duty compliance
- Facilitating board approvals and company secretarial processes
- Handling share transmission for estates and assisting in estate planning.
- Corporate restructuring and shareholder advisory
Our approach blends legal precision, strategic insight, and client-centred service, ensuring seamless and compliant share transactions.
Disclaimer: This article provides general information and does not substitute legal advice on specific circumstances of any individual or organization. While the information is accurate as of the date published, we cannot guarantee it remains accurate at the time you read it or that it will stay current. Before acting on any of this information, please seek professional legal advice tailored to your situation.
