Business owners often spend decades building a company and surprisingly little time deciding what happens if they die or lose capacity tomorrow. A trust can hold the shares, keep decision-making continuous, and turn an informal family understanding into an enforceable plan.
How does a trust hold business shares?
The owner settles the shares into a trust, and the trustees , commonly incorporated under the Trustees (Perpetual Succession) Act , are registered as the holders in the company’s records. The trust instrument sets out how the shares are to be voted, how dividends are to be applied, and who benefits. Because the trust, not any individual, holds the shares, the company’s ownership does not fragment among heirs or freeze when an owner dies.
What does a trust add that a will cannot?
- Continuity , management of the shares passes under the trust instrument without waiting for a grant of representation under the Law of Succession Act (Cap 160).
- Protection from stalemates , shares held by a trust vote as the instrument directs, rather than splitting among several heirs with different views.
- Privacy , the plan operates privately rather than through public succession proceedings.
- Alignment , the trust can sit alongside shareholders’ agreements and buy-sell arrangements signed during the owner’s lifetime.
What are the practical steps?
Valuation is a further point to settle early: shares settled into a trust should be properly valued and documented, both for the family’s own records and for any transaction that follows. Where trustees are also family members, independent directors or advisers on the company’s side add a useful check on decisions affecting the business.
Start by deciding who should hold and vote the shares, then ensure the company’s own records and agreements are consistent with the trust. Lenders and counterparties should be told where their consent is required, since financing arrangements often restrict changes in shareholding. Finally, review the structure when the business changes materially , a new partner, a refinancing, or a planned sale. Our governance and advisory team leads this work for business owners, supported by our contract law practice where company documents or financings need adjusting. Company and trust registration records are maintained by the Business Registration Service.
For guidance on your specific situation, contact CS Advocates LLP , call, WhatsApp, or book a confidential consultation at our Westlands, Nairobi office.