Shareholders’ agreements in Kenya: why co-owners need one

Founders often incorporate using standard articles and never sign anything else. That works — until a co-founder leaves, the company needs new money, or the owners disagree.

What a shareholders’ agreement covers

• Decision-making: which decisions need unanimous or special approval (reserved matters).
• Board composition: who appoints directors.
• Transfers: pre-emption rights, tag-along and drag-along rights.
• Leavers: what happens to a departing founder’s shares (good and bad leaver provisions, vesting).
• Deadlock: a mechanism to break a stalemate, such as escalation, mediation or a buy-sell clause.
• Funding: how new capital is raised and anti-dilution protections.
• Confidentiality and non-compete commitments.
• Dispute resolution: often arbitration.

Relationship with the articles

Under the Companies Act, 2015, the articles bind the company and its members. A shareholders’ agreement is a private contract between the shareholders. Where they conflict, amend the articles so the agreement can be enforced.

When to sign

Before any money is invested or shares are issued — when everyone still agrees.

This article is general information, not legal advice on your situation.

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