Every corporate reorganisation eventually needs paperwork, a conveyance, a share transfer instrument, a vesting document, and in Kenya that paperwork is ordinarily subject to stamp duty. For a genuine reconstruction or amalgamation of companies, section 95 of the Stamp Duty Act removes that cost, but only where the transaction meets a specific ninety per cent test and a collector is satisfied the conditions are genuinely met. This article covers how the relief works, what it requires, and where it fits alongside the income tax relief for internal reorganisations introduced in 2026.
The Legal Basis: Section 95 of the Stamp Duty Act
The Stamp Duty Act, Chapter 480 of the Laws of Kenya, sets out in Part IV a specific relief from stamp duty for company reconstructions and amalgamations. Section 95 allows a transferee company acquiring the undertaking, or the shares, of an existing company to claim relief from the stamp duty that would ordinarily apply to the instruments used to carry out that acquisition, provided the collector is satisfied that a defined set of conditions are met.
The Ninety Per Cent Test
The relief turns on a company being registered, incorporated, or having its capital increased with a view to acquiring either the undertaking of an existing company, or not less than ninety per cent of that company’s issued share capital, described in the section as the transferee company acquiring the existing company. Critically, the consideration for that acquisition, apart from any part consisting of the transferee company taking on or discharging the existing company’s liabilities, must itself consist of at least ninety per cent shares rather than cash: where an undertaking is being acquired, shares in the transferee company issued to the existing company or its shareholders; where shares are being acquired, shares in the transferee company issued to the existing company’s shareholders in exchange for their existing shares. A transaction funded mostly in cash, rather than in an exchange of shares, will not meet this test even if the ninety per cent ownership threshold is otherwise satisfied.
What the Relief Actually Gives You
Where the collector is satisfied the conditions are met, section 95 does two things. First, for the purpose of calculating the stamp duty payable on the transferee company’s nominal share capital, or the increase in it, the relevant value used is capped by reference to what was already treated as paid up in the existing company or credited as consideration, rather than the full uncapped value of the new shares issued. Second, and more significantly for most transactions, stamp duty that would ordinarily apply under the Conveyance or Transfer on Sale heading is simply not chargeable on any instrument made for the purposes of, or in connection with, the transfer of the undertaking or shares, on any instrument assigning the existing company’s debts to the transferee company, or on any instrument vesting the undertaking or shares in the transferee company. For a group carrying out a genuine reconstruction, this removes what is often the largest single transaction cost of restructuring an operating business or a shareholding.
The Collector’s Role
The relief is not self-executing. It depends on the collector being satisfied that the statutory conditions are actually met on the facts of the particular transaction, which in practice means the relief needs to be claimed and supported with evidence of the share capital structure, the consideration actually paid, and the ownership percentages involved, rather than simply assumed to apply because the transaction is internally described as a reconstruction. A transaction that is structured to look like a qualifying reconstruction on paper but does not in substance meet the ninety per cent thresholds is exposed to the collector declining to apply the relief.
How This Fits Alongside the 2026 Income Tax Relief
Section 95 relief is a long-standing part of the Stamp Duty Act and addresses a different tax than the internal reorganisation relief introduced by the Income Tax (Amendment) Act, 2026, covered in our companion article. The 2026 income tax and capital gains tax relief applies to a company distributing property, including subsidiary shares, to its shareholders in proportion to their existing holdings, and to shareholders contributing property back to the company as part of that same reorganisation. Section 95 stamp duty relief instead applies where a transferee company is acquiring an existing company’s undertaking or at least ninety per cent of its shares, largely in exchange for its own shares. The two reliefs can both be relevant to different steps of the same broader restructuring, a group should not assume that satisfying one automatically means the other applies, since the ownership and consideration tests are different.
Practical Implications
A business planning a reconstruction or amalgamation should model the consideration structure early, since falling even slightly below the ninety per cent share consideration threshold, for example because a meaningful cash top-up is involved, can take the entire transaction outside the relief and expose it to full ad valorem stamp duty on the transfer instruments. Groups should also keep clear records of the share capital and ownership percentages relied on to support a claim for relief, since the collector’s satisfaction is a condition of the exemption applying, not a formality.
How We Can Help
Clay & Associates Advocates advises companies on structuring reconstructions, amalgamations, and reorganisations to make efficient use of available tax and duty relief. See our companion piece on Kenya’s new tax relief for internal corporate reorganisations for the income tax and capital gains tax treatment of the underlying restructuring. Contact our Corporate & Commercial practice to discuss structuring a reconstruction or amalgamation.
Sources: Stamp Duty Act (Cap. 480), section 95.
Frequently asked questions
What is the ninety per cent test under section 95 of the Stamp Duty Act?
The transferee company must be acquiring either the undertaking of an existing company or at least ninety per cent of its issued share capital, and at least ninety per cent of the consideration for that acquisition must itself be shares in the transferee company rather than cash.
Does the relief apply automatically once the ninety per cent thresholds are met?
No. The collector must be satisfied that the statutory conditions are met before the relief applies, which in practice means the claim needs to be supported with evidence of the share structure and consideration involved.
Does section 95 relief cover the same transactions as the 2026 income tax relief for internal reorganisations?
Not necessarily. Section 95 applies to a transferee company acquiring an existing company’s undertaking or shares largely for its own shares, while the 2026 income tax relief applies to pro-rata distributions of property, including subsidiary shares, by a company to its existing shareholders. The two can apply to different steps of the same broader restructuring.
What stamp duty cost does section 95 relief actually remove?
Where satisfied, it removes stamp duty under the Conveyance or Transfer on Sale heading on the instruments transferring the undertaking or shares, on debt assignment instruments, and on vesting instruments, and caps the value used to calculate duty on the transferee company’s increased share capital.
