For many Nairobi business owners, the company is the estate. Yet succession is the item most likely to be missing from an otherwise careful plan , and the gap only becomes visible when it can no longer be fixed by the person best placed to fix it.
What happens to a business when its owner dies in Kenya?
It depends on the form of the business. A sole proprietorship’s assets and liabilities fall into the deceased’s estate for administration under the Law of Succession Act (Cap 160), which can be read on the Kenya Law website at https://www.kenyalaw.org/. Shares in a private company pass under the will or the intestacy rules, but the articles of association and any shareholders’ agreement may restrict who can hold or transfer them. Partnerships are governed by the partnership arrangement, which may dissolve or continue on a partner’s death depending on its terms.
How should a business owner plan for succession?
- align the will with the company’s articles and any shareholders’ agreement, and resolve conflicts now rather than leaving them to executors;
- consider whether shares should pass to co-directors, family members or a trust, and document how any buy-out would be funded;
- ensure key documents , constitutions, registers, licences and security instruments , are current and locatable;
- provide liquidity: life cover or reserves can prevent a forced sale of business assets at the wrong time.
What special issues arise with borrowed or secured businesses?
Where a business has borrowed , against land, equipment or receivables , the death of a principal triggers practical consequences: lenders review security and personal guarantees, and successors need authority to deal with the banks. Coordinating the estate plan with the financing documents avoids surprises for the family. Our banking and securities team regularly advises on this interface.
When should succession planning be revisited?
At every significant corporate event: a new shareholder, a refinancing, a restructuring, or the admission of family members to the business. A will drafted years before the company changed shape can quietly contradict it, and contradictions discovered during estate administration are expensive to resolve.
Succession works best when it is designed into the business rather than added afterwards. CS Advocates LLP advises business owners on wills, shareholder arrangements and governance; our governance advisory practice supports family and closely held companies through these decisions.
For guidance on your specific situation, contact CS Advocates LLP , call, WhatsApp, or book a confidential consultation at our Westlands, Nairobi office.