Procedure of increasing share capital of a company in Kenya

Procedure of increasing share capital of a company in Kenya

Increasing the share capital of a company in Kenya is a formal process governed by the Companies Act, 2015. Businesses may choose to increase their share capital to raise additional funding, admit new investors, or strengthen their balance sheet.

1. Understanding Share Capital

Share capital refers to the total nominal value of shares that a company can issue to its shareholders. The authorized share capital is set out in the company’s constitution (memorandum and articles of association) and the Statement of Nominal Capital filed during incorporation.

When a company needs more capital than originally authorized, it must formally increase its share capital through a prescribed legal process.

2. Reasons for Increasing Share Capital

Common reasons include:

• Raising funds for expansion or new projects.

• Admitting new shareholders or investors.

• Strengthening the company’s financial position for loans or tenders.

• Compliance with statutory or contractual requirements.

3. Legal Framework

The procedure for increasing share capital is regulated under:

• Companies Act, 2015 (Part IV – Share Capital)

• The company’s Articles of Association

• Business Registration Service (BRS) requirements

4. Step-by-Step Procedure

Step 1: Review the Articles of Association

Check whether the company’s articles permit an increase in share capital.
If they restrict or do not provide for it, you must first amend the articles by passing a special resolution.

Step 2: Convene a Board Meeting

The directors must hold a board meeting to:

• Discuss the need for increasing share capital.

• Approve the proposed amount of increase.

• Call for a general meeting of shareholders to pass the necessary resolution.

Step 3: Pass a Special Resolution

At the general meeting:

• Shareholders pass a special resolution approving the increase in share capital.

• The resolution should specify:

  • The amount of the increase.

  • The new total share capital.

  • Any changes in share classes (if applicable).

A special resolution requires at least 75% of shareholders present and voting to approve it.

Step 4: Prepare and File Required Forms with BRS

The following documents must be filed through the eCitizen BRS portal within 14 days of passing the resolution:

1. Form CR19 – Notice of Increase in Nominal Share Capital.

2. Special Resolution – Certified copy signed by the company secretary or director.

3. Updated Memorandum and Articles of Association (if amended). This particularly applies to companies that were registered with a Capital Clause.

4. Payment of Stamp Duty – Stamp duty is payable on the increased capital at the prescribed rate.

Step 5: Pay Stamp Duty

The stamp duty rate for an increase in share capital is 1% of the increase (subject to current regulations).
Payment is made to the Kenya Revenue Authority (KRA) through the iTax platform.

Step 6: Update Company Records

Once approved by the Registrar of Companies:

• Update the Register of Members and Register of Allotments.

• Issue new share certificates to shareholders (if applicable).

• Update any corporate documents or filings referencing share capital.

• It’s important to allot the new shares that were issued to the Shareholder.
• Obtain a CR12 to

5. Timelines

• Board and shareholder approvals – 1–7 days

• BRS filing and approval – 3–14 days (depending on processing speed)

• Stamp duty payment and confirmation – 1–3 days

6. Penalties for Non-Compliance

Failure to file the notice of increase within 14 days can result in:

• Penalties from the Registrar of Companies.

• Possible legal challenges to the validity of the increase.

• Ineligibility for certain contracts or transactions.

• Download our checklist here.