How a shareholders' agreement works with the articles
Every Kenyan company has articles of association, which are public and bind the company and its members. A shareholders' agreement is a private contract between the shareholders (and often the company). It can deal with commercially sensitive matters that the parties do not want on the public register.
The two documents must be consistent. Where they conflict, disputes follow — so we draft or amend both together, and make sure the agreement's key protections are also reflected in the articles where they need to bind future shareholders.
Clauses every Kenyan shareholders' agreement should consider
The right terms depend on the business and the balance of power between shareholders. The issues we work through with clients usually include:
- Board composition and the right to appoint directors
- Reserved matters that need shareholder or investor approval
- Pre-emption rights on new shares and on transfers
- Drag-along and tag-along rights on a sale
- Good leaver and bad leaver provisions for shareholders who also work in the business
- Dividend policy and funding obligations
- Deadlock resolution, including escalation, mediation and buy-out mechanisms
- Confidentiality, non-compete and non-solicitation undertakings
- Dispute resolution — courts or arbitration under the Arbitration Act 1995
Common risks and mistakes
- Relying on oral understandings between friends or family members.
- 50:50 companies with no deadlock mechanism, which can leave the business unable to make decisions.
- Agreements that conflict with the articles, creating uncertainty about which rule applies.
- No exit route for a minority shareholder, or no way to remove a shareholder who leaves the business.
- Restrictive covenants drafted so broadly that they may not be enforceable.
Who should seek counsel
- Co-founders setting up a new company
- Businesses admitting an investor or new shareholder
- Family businesses planning ownership succession
- Joint venture partners using a Kenyan company as the vehicle
How we work
- 1Understand the dealWe take instructions on ownership, control, funding and each party's priorities.
- 2Term outlineWe set out the key terms in plain language so shareholders can agree the commercial points first.
- 3DraftingWe prepare the agreement and any amendments to the articles so the two documents work together.
- 4Negotiation and signingWe negotiate with the other parties' advocates and manage signing and any filings.
Advocates for this matter
Frequently asked questions
No, but it is strongly advisable for any company with more than one shareholder. Without one, shareholders rely on the articles of association and the Companies Act 2015, which may not reflect what they actually agreed.
The articles are the company's public constitution and bind all members. A shareholders' agreement is a private contract between the shareholders that can cover sensitive commercial terms. The two should be drafted to be consistent.
If there is no deadlock clause, the company may be unable to take key decisions and the shareholders may end up in court. A good agreement sets out escalation steps, mediation and, if needed, a buy-out mechanism.
It can restrict transfers — for example through pre-emption rights that require shares to be offered to existing shareholders first. To bind future shareholders reliably, such restrictions should also appear in the articles.
Yes, usually with the consent of the parties as set out in the agreement's amendment clause. We review existing agreements and advise on amendments when a company admits investors or its circumstances change.
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This page gives general information about Kenyan law and is not legal advice for your situation. Contacting us does not create an advocate–client relationship. Last reviewed 8 Oct 2026.