Share Transfer in a private limited company Kenya

Share Transfer in a private limited company Kenya

Transfer of share(s) and change of directorship of a company is usually at the company registry on behalf of the directors of the company by a Certified Public Secretary of Kenya (CPSK).. The ownership of a private company is determined by the shareholding of the Company. To induct new investors or transfer ownership of the Company, the share of the private limited company would have to be transferred.  Get to learn how to transfer

Requirements

  • Memorandum and Articles of Association of the company (for the companies which the directors have not resolved to adopt the model articles of association as provided for by the company’s act 2015)
  • Copy of Certificate of Incorporation
  • The company must have filled all its annual returns for the previous years with the registrar of companies.
  • In addition, the company must file interim returns (for part of the current incomplete year).
  • Obtain minutes for the meeting in which the resignation (of outgoing) and appointment (of incoming) director(s) was discussed.
  • File CR 19 (notice of special/ordinary resolution required by companies act to be lodged with registrar)

Requirements for Incoming Director(s)

  • Obtain consent from the person(s) being appointed as director(s).
  • Obtain residential address of the new director and file CR 8 (Notice for residential address/change of address of director(s) of company)
  • Obtain copies of PIN, National ID or Passport and passport size photo for the new director
  • File CR 6 (Notice for appointment of new director(s) and their particulars.

Requirements for Outgoing Director

  • Obtain written resignation letter from the outgoing director (s)
  • File CR 9 (Notice of cessation of office of directors)
  • Obtain an affidavit indicating that you are willingly resigning as director(s) and transferring your interest to another director(s).

Transfer of Shareholding

  • The parties involved i.e., the outgoing director(s)/transferor(s) and incoming director(s)/transferee(s) should sign a transfer deed (Form of transfer).
  • The company secretary will then assess the stamp duty and have the transfer lodged (registered) at the Registrar of Companies.

Confirmation of the Transfer

Once the changes have been affected successfully, the company Secretary requests for the new list of directors(s) and their shareholding by obtaining the CR 12 from the company’s registry

Restrictions on right of the shareholders to transfer shares are usually in two forms:

  • Rights of pre-emption: If a shareholder wishes to sell some or all of his shares, such shares must first be offered to other existing members of the private limited company at a price determined by the Directors or the Auditor of the Company. The value of the shares can be determined based on the formula / method prescribed in the Articles of Association. In no existing shareholder is interested, then shares of the Company can be freely transferred to an outsider.
  •  Powers of Directors to refuse: The Director may have the powers to refuse registration of transfer of shares under certain circumstances – prescribed in the Articles of Association.

Only restriction contained the Articles of Association are considered legally binding. Any private agreement between the shareholders is not binding either on the company or on the shareholders. Further, share transfer can only be restricted by the Articles of Association. The right to transfer shares of a private limited company cannot be a total prohibition or ban on share transferability.

Share Transfer Procedure Initiation

  • Step 1: Review the AOA: Articles of Association of the Private Limited Company must be reviewed and restrictions, if any must be addressed.
  • Step 2: Shareholder must give notice in writing to the Director of the Company about intention to transfer share of the company.
  • Step 3: Determine the price as per Articles of Association at which the shares of the Company will first be offered to present shareholders of the Company. (Usually, this price is determined by the Directors of the Company or an Auditor of the Company.)
  • Step 4: The company must then give notice to the other shareholders about the availability of share, the last date to purchase the shares and the price at which the share is available.

If any of the present shareholders come forward for the purchase of shares, such shares must be allotted to them. In case no present shareholder is interested or excess shares are available, the same can be transferred to the outsider.

share transfer, the following steps must be followed:

  • Step 1: Obtain share transfer deed in the prescribed format.
  • Step 2: Execute the share transfer deed duly signed by the Transferor and Transferee.
  • Step 3: Stamp the share transfer deed as per the Indian Stamp Act and Stamp Duty Notification in force in the State.
  • Step 4: Have a witness sign the share transfer deed with his/her signature, name and address.
  • Step 5: Attach the share certificate or allotment letter with the transfer deed and deliver the same to the Company.
  • Step 6: The company must process the documents and if approved, issue new share certificate in the name of the transferee.