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What happens when you surrender your shares | Netsheria legal articles | legal documents in Kenya

What happens when you surrender your shares?

WHAT HAPPENS WHEN YOU SURRENDER YOUR SHARES?

What are surrendered shares?

  • Surrendered shares are shares that have been voluntarily returned to a company by the registered shareholder of those shares.
  • In that, surrendering shares is the transfer of allotted shares back to the company that issued them.

When should shares be surrendered?

The Companies Act 2015, allows companies to accept surrendered shares in accordance with the Company’s Articles of Association, where;

  • the Shareholder has been unable to pay any outstanding sums on the allotted shares,
  • The Companies (General) Regulations, 2015 provides for 3 scenarios where a person may opt to surrender their shares to a company, namely:
  1. Where a notice of the intended forfeiture of those shares has been issued by the company directors for failure to pay a specified amount regarding them;
  2. Where the directors may forfeit those shares; or
  3. Where the shares have already been forfeited.

What happens when a Shareholder’s shares are surrendered?

  • The Shareholder who has surrendered his or her share ceases being a member of the company as well as disposes of any rights or liabilities attached to those shares.
  • He or she is also required to surrender their share certificate for cancellation.
  • However, in some instances and depending with the company’s Articles of Association, a shareholder who has surrendered their shares will still be liable to the respective company for any sums payable under the company’s articles of association plus interest.
  • Lastly, if the company sells the shareholder’s surrendered shares to another person, he or she is entitled to receive from the company the proceeds from such sale, but minus any commission and excluding any amount payable prior to the forfeiture of the shares.

Can a shareholder surrender their fully paid-up shares voluntarily?

  • The Companies Act, 2015 does not prohibit shareholders of a company from voluntarily surrendering their fully paid-up shares.
  • The Act allows companies to acquire their own shares upon paying the full amount of consideration for those shares. Simply put, a shareholder can voluntarily surrender their shares to the issuing company upon receiving back and in full the capital they invested into the company as consideration.

At Netsheria International, we have an experienced team of lawyers who can offer you legal assistance in company restructuring and incorporation. For more information, you can go to our website www.netsheria.com.

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