How To Transfer Company Shares In Kenya

Transferring company shares is a common practice in the corporate world, whether due to changes in ownership, restructuring, investment opportunities, or exit of shareholders.

In Kenya, the transfer of company shares is governed by the Companies Act, 2015, and is overseen by the Business Registration Service (BRS) under the Attorney General’s Office.

Whether you’re a business owner, investor, or corporate secretary, understanding how to properly transfer shares is crucial to ensuring compliance with the law and protecting the rights of all stakeholders.

Here’s a breakdown of the legal and procedural steps required to transfer shares in a private limited company in Kenya.

1. Review the Company’s Articles of Association

Before initiating a share transfer, check the Articles of Association to confirm any restrictions on transferability. Most private companies include a pre-emption clause, requiring existing shareholders to be given the first opportunity to purchase shares before they are offered to outsiders.

Some companies also require Board or shareholder approval before a transfer can proceed.

2. Prepare a Share Transfer Agreement

A Share Transfer Agreement (also called a Sale of Shares Agreement) should be drafted and signed by the transferor (seller) and the transferee (buyer). This document outlines:

• The number of shares being transferred
• The consideration (purchase price)
• Representations and warranties
• Effective date of the transfer

While not mandatory under Kenyan law, the agreement serves as a vital legal record of the transaction.

3. Fill Out the Share Transfer Form (Form of Transfer)

The next step is to complete the CR19 Form – the official share transfer instrument provided by the Business Registration Service.

Details required include:

• Name of the company
• Name and signature of the transferor and transferee
• Number and class of shares
• Consideration amount (if any)

This form must be signed by both parties and, in some cases, witnessed.

4. Board Resolution and Approval

The company’s Board of Directors must convene and pass a resolution approving the transfer. The resolution should:

• Accept the share transfer
• Approve the registration of the new shareholder
• Authorise the company secretary to update company records

This is documented in Board Meeting Minutes and should align with the company’s governance structure.

5. Update the Register of Members

Once the transfer is approved, the company must update its Register of Members to reflect the new shareholder’s details and shareholding percentage.

This step is crucial because the Register of Members is the legal proof of ownership in a private company.

6. File Changes with the Business Registration Service (BRS)

The company must then log in to the eCitizen platform and file:

• Form CR19 (Share Transfer Form)
• CR6 (Particulars of the Directors and Shareholders if there are changes)
• A copy of the Board Resolution
• Updated Register of Members

These documents must be submitted under the company’s Company PIN via the BRS portal on eCitizen.

7. Pay Stamp Duty (If Applicable)

Under the Stamp Duty Act, stamp duty of 1% of the share value is payable to the Kenya Revenue Authority (KRA) on the transfer of shares, unless an exemption applies (e.g., between related parties or in company restructurings).

Payment is made through the iTax system, and proof of payment must be submitted during filing.

8. Issuance of New Share Certificate

Upon completion of all filings and approvals, the company secretary should issue a new share certificate to the transferee and cancel or update the previous holder’s certificate.

This certificate formally confirms the ownership of shares by the new shareholder.

Why Proper Share Transfer Matters

Failure to follow the proper procedure can lead to legal disputes, rejection of filings, penalties, or questions of ownership. Moreover, in cases of fundraising, exit planning, or investor onboarding, clear and updated shareholder records are essential.

Conclusion

Transferring company shares in Kenya is a structured legal process that demands accuracy, transparency, and adherence to corporate governance. While the eCitizen portal has streamlined some aspects of business registration and filing, professional guidance from a lawyer or company secretary is advisable to avoid costly errors.

Whether you’re bringing in a new investor or handing over control, ensuring a clean and legal transfer of shares protects everyone’s interests and strengthens corporate integrity.

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