Holding Family Company Shares Through a Trust in Kenya

For many Kenyan families, the most valuable asset is not land but shares in the family company. When the founder dies holding those shares personally, they become part of the estate: no one may deal with them until a grant of representation is issued (section 45 of the Law of Succession Act), and they are then divided among heirs who may not agree on how the business should be run. Holding the shares through a family trust is one way to keep ownership together and the business running. This guide explains how that works under the Trust Administration Act, 2026.

Why hold company shares through a trust?

• Continuity. Shares transferred to trustees during the founder’s lifetime are no longer the founder’s personal property, so they do not wait on probate. The trustees continue to vote them and receive dividends.
• Unity of control. Instead of the shareholding fragmenting among several heirs, it stays in one block, voted by the trustees under the terms of the deed.
• Provision across generations. A family trust exists to preserve or create wealth for generations (section 10 of the Act), and trustees may apply income for the maintenance and education of minor beneficiaries (section 50).

Our guide to family business succession covers the wider governance picture, and our article on formalising the board of a family business explains why the trust structure should sit alongside a functioning board rather than replace it.

Who holds the shares: registered or incorporated trust

The route you choose under the Act determines whose name goes on the company’s register of members.

• A registered trust has no legal personality (section 27(2)). The shares are registered in the names of the individual trustees, who hold them on trust. When a trustee retires or dies, the shares must be transferred to the new trustees.
• An incorporated trust is a body corporate that can hold property in its own name (section 32). The trust itself becomes the shareholder, so a change of trustees does not require a share transfer.

For a family company that will be held for decades, incorporation usually gives cleaner continuity. Our guide to registered and incorporated family trusts sets out both processes.

Keeping control: settlor powers and trustee duties

Founders are often reluctant to hand over shares because they fear losing control. The Act addresses this directly. Subject to the deed, a settlor may reserve the power to give trustees directions on the purchase, retention, sale, pledging or charging of trust property and on the exercise of any rights arising from it, which includes voting shares (section 13(1)(c)). The settlor may also appoint or remove trustees (section 13(1)(d)) and can serve as a trustee (section 12(3)).

Trustees, in turn, are bound by statutory duties. They must keep trust property separate from their own (section 47) and may not profit from the trusteeship (section 45). Section 51(4) allows trustees to invest trust assets only where the deed authorises it and the investment, among other things, poses no actual or potential conflict of interest. That matters in a family company, where trustees are often also directors or employees. The deed should expressly authorise the trust to hold the family company’s shares and deal with how conflicts between trustee and director roles are managed.

Does a family trust “trade” if it owns a trading company?

Section 10(2)(c) requires a family trust to be a non-trading entity. On our reading, holding shares in a company that trades is an investment by the trust, not trading by the trust itself, so the business should sit in the company and the trust should only own the shares. This point has not yet been tested under the new Act, which is a further reason to keep a clear separation: the trust should not run operations, sign trading contracts or employ staff.

Moving the shares into the trust

1. Check the articles. Most private company articles contain pre-emption rights or require board approval for share transfers. Waivers or approvals may be needed before shares can move to the trustees.
2. Execute the transfer. The shares are transferred by an instrument of transfer and the register of members is updated.
3. Consider tax. The First Schedule to the Income Tax Act exempts gains on property, including investment shares, transferred into a registered family trust (paragraph 36(g)). Stamp duty is less straightforward: the Stamp Duty Act treats a voluntary transfer as if it were a sale (section 52(1)), and its express exemption for transfers to a registered family trust is limited to trusts for charitable purposes (section 52(2)(b)). Budget for duty unless the Collector confirms otherwise.
4. Update two beneficial ownership registers. The company must keep and lodge a register of its beneficial owners under section 93A of the Companies Act, 2015, whose definition of beneficial owner covers natural persons who own or control through legal arrangements such as trusts. The trust must separately keep and lodge its own register (sections 65 and 66 of the Trust Administration Act). The two must tell a consistent story. Our guide to beneficial ownership filings covers the company side.