Wills and transmission of shares in Kenya

published on 3 February 2022 | reading time approx. 2 minutes

A will is defined as the legal declaration by a person of his wishes or intentions regarding the disposition of his property after his death, duly made and executed and includes a codicil. A codicil on the other hands means a testamentary instrument made in relation to a will, altering or adding to its dispositions or appointments duly made and executed.

A person who dies having drafted a will is said to have died testate while one who had not prepared a will is said to have died intestate. Different succession proceedings are applied in the management of the deceased’s estate under each circumstance.

Wills plays an important role in helping a Testator (the person writing the will) to plan his estate in the event of death. Largely, a will enables one to achieve one or all of the following objectives:

To avoid protracted intestate proceedings.
To appoint a qualified manager over his assets referred to as the Executor.
To determine how the estate will be distributed.
To determine who will take care of the minors.
To manage the uncertainties in life tied to death.
To maintain flexibility in updating the list of beneficiaries when circumstances change.
To make gifts and donations.

Distribution of the Estate

The wishes or intentions of the testator can be wide and varied and a will can be used to manage various types of assets and beneficiaries of different classes. To put this in perspective, the assets forming the subject matter of the estate may include moveable and immoveable property, the beneficiaries may include the spouse, parents, siblings, children, grandchildren, charitable organizations. This article will briefly examine how wills are used to dispose company shares to the nominated beneficiaries.

A share is refers to one of the equal parts into which a company's capital is divided, entitling the holder to a proportion of the profits.

Transmission of Shares

This refers to the process by which shares of a deceased person are inherited by the beneficiary nominated in a will. This process is regulated by the Succession Act No. Chapter 160 Laws of Kenya and the Companies (General) Regulations, 2015.

Prior to relying to the contents of the will to effect the transmission of shares, the will in question is examined to determine its validity.

Requirements

The followings conditions must be fulfilled to facilitate the process:

A personal representative/an administrator must be appointed
The deceased shareholder must have domiciled in Kenya
If the shares are co-owed, the shares will be transmitted to the surviving co-owner in accordance with the principles of survivorship
If the shares are owned by an individual, the transmission of shares will be regulated by the Company’s Articles of Association and in the absence, the process will be governed by Regulation 8(2) of the Companies (General) Regulations, 2015 which provide for the model Articles for private Companies limited by shares.

Our Legal team can help you plan your estate through preparation of a will. We are also available to the much needed advise to beneficiaries nominated by a will to inherit various assets which may include shares from a Company. We help clients navigate through related legal hurdles while at the same time making the process bearable for them.