A shareholder wants out, an investor wants in, or one founder is buying another’s stake. Transferring shares in a private company is routine, but the steps interlock: the constitution controls the process, the company’s registers give effect to it, and the tax and registry consequences follow in sequence. Order matters, and shortcuts surface later as defects in title.
What does the constitution require first?
Private company constitutions commonly restrict transfers, through pre-emption rights giving existing shareholders the first opportunity to buy, or through requirements for board approval. These controls should be worked through before any price is agreed, since a transfer made in disregard of them can be challenged by the shareholders they were designed to protect. The Companies Act, 2015, available through Kenya Law, generally leaves such arrangements to each company’s constitution, which is why the document should be read before negotiations conclude. A shareholders’ agreement may add rights of first refusal or lock-in provisions, and those too should be checked at the outset.
What documents record the transfer?
- A sale agreement or instrument of transfer executed by transferor and transferee.
- Board resolutions approving the transfer and the resulting register entries.
- A stamp duty assessment and payment on the transfer instrument.
- Surrendered share certificates and new certificates issued to the buyer.
- An updated register of members maintained by the company.
What taxes and filings follow?
Stamp duty is chargeable on the instrument, assessed and paid through the Kenya Revenue Authority’s platform at KRA, and the duty must be paid before the instrument is stamped and takes effect. Late payment attracts penalties and interest, so the assessment should be requested early in the timetable. The Registrar of Companies is then notified of the change in shareholding so the public record matches the company’s registers. The parties should retain the stamped instrument permanently, since it is the buyer’s proof of title when banks and diligence teams ask for it.
The firm drafts share transfer documentation and oversees the tax and registry steps through its contract practice and its governance advisory team, keeping the internal approvals and the public record in step.
For guidance on your specific situation, contact CS Advocates LLP , call, WhatsApp, or book a confidential consultation at our Westlands, Nairobi office.