MasiboLaw

Every company, whether big or small, needs money to grow. One of the main ways companies raise money is by selling shares to investors. Shares represent ownership in a company, and the people who buy them—called shareholders—become part-owners. In Kenya, well-known companies like Safaricom have sold shares to the public. This means individuals and organizations can invest and become shareholders.

Types of Shares in Kenya

Ordinary Shares

Most companies issue ordinary shares. These shareholders have voting rights and receive dividends (a share of the company’s profits). Many companies follow the Model Articles of Association, which include standard rules for shareholders.

If a company wants to issue other types of shares, it must change its Articles of Association to describe the rights of each share type.

Preference Shares

Preference shares give shareholders fixed profits before ordinary shareholders. In some cases, they also get their money back first if the company closes down. However, these shareholders usually don’t have voting rights.

Non-Voting Shares

Some companies issue shares that do not give voting rights. These allow people to earn dividends without making business decisions. Such shares are often given to family members of major shareholders or employees as part of a company share scheme.

Redeemable Shares

These shares allow a company to buy back its shares after a certain period.

Management Shares

These shares are usually held by the company’s original owners so they can keep control over important decisions, even if new investors join.

Deferred Ordinary Shares

These shares only receive dividends after all other shareholders have been paid. However, they usually have voting rights and may receive a portion of company assets if the company closes down.

ABC or Alphabet Shares

Ordinary shares can be divided into different classes (e.g., A, B, or C shares). Each class may have different voting rights, dividend rates, or other benefits.

For example, if two business partners each own one share but contribute different amounts of money, they might get different rights:

• One partner could get 50% voting rights, 50% dividend rights, and 70% capital rights
• The other partner could get 50% voting rights, 50% dividend rights, and 30% capital rights

This setup reflects how much money each person invested.

Types of Shareholders

Common Shareholders

These are the main owners of the company. They have voting rights and receive dividends, but if the company closes, they are paid last.

Preference Shareholders

These investors own preference shares, which means they get dividends first and are paid before common shareholders if the company shuts down. However, they usually don’t have voting rights.

Individual Shareholders

These are private investors who buy shares for personal investment.

Institutional Shareholders

These are organizations (like banks, pension funds, or insurance companies) that invest large amounts of money in company shares.

Majority Shareholders

These shareholders own more than 50% of a company’s shares, giving them decision-making power.

Minority Shareholders

These investors own less than 50% of a company’s shares and have less influence on business decisions.

Resident Shareholders

These are investors who live in the country where the company is registered.

Non-Resident Shareholders

These refer to foreign investors who own shares in a company but live in another country.

Understanding the different types of shares and shareholders is key to making smart investment decisions. Whether you’re starting a business, investing in a company, or need legal guidance on shareholder rights, our team is here to help.

Reach out to us at info@masibolaw.co.ke for expert legal advice on company shares, shareholder agreements, and business structuring.

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