Appointment of a Shareholder in Kenya

Appointment of a Shareholder in Kenya

A shareholder is an owner of a company. A shareholding certificate confirms the number of shares an individual or a corporation in a company. Shareholding implies ownership. 

Appointment of a shareholder can be made in various ways such as; 

1. During the incorporation of a company 
2. Transfer of shares from an existing shareholder
3. Allotment of existing shares by the company 

1. During the Incorporation of a Company

At the time of incorporating a company, the initial shareholders (also referred to as subscribers) are listed in the company’s Memorandum of Association. These individuals or entities are the founding shareholders, and their details are included in the company’s incorporation documents filed with the Registrar of Companies. The shareholding structure at this stage determines the percentage of ownership each shareholder holds.

Key steps during incorporation include:

• Submission of the company’s name for reservation.
• Drafting of the Memorandum and Articles of Association, which outline the shareholding details.
• Payment of statutory registration fees and filing the necessary incorporation forms with the Registrar of Companies.

2. Transfer of Shares from an Existing Shareholder

A shareholder may be appointed through the transfer of shares from an existing shareholder. This process involves the current shareholder selling or gifting their shares to the new shareholder. The procedure is governed by the company’s Articles of Association and the Companies Act, 2015, which outline the terms and conditions for transferring shares.

Steps involved in a share transfer include:

• Execution of a share transfer form by the transferor (existing shareholder) and transferee (new shareholder).
• Payment of the requisite stamp duty, calculated based on the value of the shares being transferred.
• Approval of the share transfer by the company’s Board of Directors, subject to any restrictions outlined in the Articles of Association.
• Issuance of a new share certificate to the transferee and cancellation of the old certificate.

3. Allotment of Shares by the Company

A company can issue new shares to individuals or entities, effectively appointing them as shareholders. This process, known as share allotment, increases the company’s share capital and often requires shareholder approval at a general meeting. Share allotment may be done to raise capital, attract strategic investors, or reward employees through stock options.

Steps involved in allotment include:

• Passing a board resolution to approve the issuance of new shares.
• Filing a return of allotment with the Registrar of Companies within one month of the allotment.
• Issuing share certificates to the new shareholder(s) and updating the company’s register of members.