Please note that Article 56 of the Adopted Model Articles for Private

Companies provide that all shares should be fully paid up.

Application Details
Articles of association
(Select the option that applies)
The company will adopt the model articles of association applicable
to the type of company selected.
click here to view the articles of association

The company will adopt some of those model articles and has
prepared its own articles of association to supplement or modify those
model articles or

The company has prepared its own articles of association

HOW TO DO SHARE SUB-DIVISION IN 7

STEPS-KENYA
https://www.linkedin.com/in/rolph-lemayan/?lipi=urn%3Ali%3Apage%3Ad_flagship3_pulse_read
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Rolph Lemayan
(Senior Legal Officer-Compliance at BRS (Business Registration Service KE)

Under Companies Act,2015 ( a replica of English Company Law), capital maintenance rules

require the share capital of a company to be preserved. These rules stem from a cardinal
principle of law which that is that the share capital of a company limited by shares belongs to the
company and not its shareholders. This provides protection to the company’s creditors as the
share capital should prevent any unpaid debts.

Capital Maintenance involves: subdivision and consolidation of shares; increment of

share capital; reduction of share capital which can be done by Special Resolution and a
Court Order or by Special Resolution and a Solvency Statement (Applicable to Private
Companies)
SHARE SUB-DIVISION OR SHARE SLIP
A company may sub-divide its shares, or any of them, into shares of a smaller nominal amount
than its existing shares provided that the proportion between the amount paid and the amount, if
any, unpaid on each resulting share is the same as it was before the share split.

Essentially, a share split or share subdivision is where the shares in an existing share class are
each subdivided into two or more new shares. A straightforward split will not change the
shareholders’ rights, meaning that following the split, the voting control and rights
to dividends will be unchanged. It just changes the number of shares and the nominal
value of each share.

An easier way to understand Share Split is the "Pizza Analogy" - where you can cut the
Pizza into 2 Parts, 4 Parts or any other percentage and when the pieces are put together,
they still make the ""same original whole Pizza before the subdivision".

7 Steps for doing the share sub-division

1. Do the Articles of the Company allow a share sub-division?

There is, following the enactment of the Companies Act 2015, no longer a requirement for the
company’s Articles of Association to permit the subdivision of shares. However, you will need
to check that the Articles do not actively restrict or exclude the right to split the company’s
shares. If the company was formed with the model articles then, provided they have not been
amended, you will have the right to split or subdivide your shares.

1. Is there a Shareholders agreement in place?

Although the subdivision will leave each shareholder with the same percentage interest after the
split as before, it is worth checking if there is a shareholders’ agreement and whether there are
special provisions that need to be observed – for example, the company may need to give special
notice before continuing with the subdivision.

1. Ensure the Share Subdivision ratio is appropriate.

2. Pass an Ordinary Resolution (Form CR 19).
3. File Forms: CR 34 (Notice of Sub-division, Consolidation and Redemption of Shares)
and CR 19 with the Registrar of Companies
4. Update the Register of members accordingly to reflect the new share structure.
5. Issue new Share Certificates.

In case you require to do share split for your company, feel free to reach me.

About the Editor: Rolph Lemayan W. - Corporate & Commercial - Legal Compliance

Specialist at RCA Advocates based in Nairobi, Kenya. RCA is Client Focused and Results
Driven.
Disclaimer: This article is for general information only and should not be construed as
professional advice in any way and the position of the law is as per the date
posted. For legal advice, you can email info@rolphadvocates.co.ke for any
clarifications.

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Rolph Lemayan
Senior Legal Officer-Compliance at BRS (Business Registration Service KE)
Published • 1y
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A share split or share subdivision is where the shares in an existing share class are each
subdivided into two or more new shares. A straightforward split will not change the
shareholders’ rights, meaning that following the split, the voting control and rights to
dividends will be unchanged. It just changes the number of shares and the nominal
value of each share. hashtag#sharesplit hashtag#sharesubdivision hashtag#companylaw
hashtag#corporatelawyer hashtag#corporatecompliance hashtag#lawyering
hashtag#lawyer hashtag#stocksplit hashtag#capitalmaintenance
How Do I Value the Shares That I Own in a
Private Company?
By 
JOSEPH NGUYEN 
Updated August 13, 2021

Reviewed by 
SAMANTHA SILBERSTEIN
Fact checked by 
KATRINA MUNICHIELLO

Share ownership in a private company is usually quite difficult to value due to the
absence of a public market for the shares. Unlike public companies that have the
price per share widely available, shareholders of private companies have to use a
variety of methods to determine the approximate value of their shares.

KEY TAKEAWAYS

 Unlike public companies that have their price per share readily available,
certain methods must be used to value private companies.
 Methods for valuing private companies could include valuation ratios,
discounted cash flow (DCF) analysis, or internal rate of return (IRR).
 The most common method for valuing a private company is comparable
company analysis, which compares the valuation ratios of the private company
to a comparable public company.
 There's also the DCF valuation, which is more complicated than a comparable
company analysis.
 Valuation of private shares is often a common occurrence to settle a
shareholder dispute or inheritance, or when shareholders are seeking to exit the
business.

Some common methods of valuing private companies include comparing valuation

ratios, discounted cash flow (DCF) analysis, net tangible assets, internal rate of
return (IRR), and many others.

Comparative Company Analysis

The most common method and easiest to implement is to compare valuation ratios
for the private company versus ratios of a comparable public company. If you are
able to find a company or group of companies of relatively the same size and similar
business operations, then you can take the valuation multiples such as the price-to-
earnings (P/E) ratio and apply it to the private company.

For example, say your private company makes widgets and a similar-sized public
company also makes widgets. Being a public company, you have access to that
company's financial statements and valuation ratios.

If the public company has a P/E ratio of 15, this means investors are willing to pay
$15 for every $1 of the company's earnings per share (EPS). In this simplistic
example, you may find it reasonable to apply that ratio to your own company.

If your company had earnings of $2 per share, you would multiply it by 15 and would
get a share price of $30 per share. If you own 10,000 shares, your equity stake would
be worth approximately $300,000.

You can do this for many types of ratios—book value, revenue, operating income,
etc. Some methods use several types of ratios to calculate per-share values and an
average of all the values would be taken to approximate equity value.

Discounted Cash Flow (DCF) Valuation

DCF analysis is also a popular method for equity valuation. This method utilizes the
financial properties of the time-value of money by forecasting future free cash
flow (FCF) and discounting each cash flow by a certain discount rate to calculate
its present value.

This is more complex than a comparative analysis and its implementation requires
many more assumptions and "educated guesses." Specifically, you have to forecast
the future operating cash flows, capital expenditures (CapEx), growth rates and an
appropriate discount rate.

Valuation of private shares is often a common occurrence to

settle shareholder disputes, when shareholders are seeking to exit the business, for an
inheritance, and many other reasons.

There are numerous businesses that specialize in equity valuations for private
business and are frequently used for a professional opinion regarding the equity value
in order to resolve the issues listed.
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Nominal Share Capital Explained

When registering a limited company in Kenya, the minimum nominal share capital is Ksh. 100,000
(1,000 shares). Legally the law (The Company Act) allows a minimum of 1,000 shares with a
nominal share capital of Ksh. 100,000 (Value of Ksh. 100 per share) in all Limited Liability
Company being registered in Kenya.
The Government has a standard fee charged for Stamp duty at Ksh. 2,000, then 1% is charged
towards the total nominal share capital of the company, in this case 1% of Ksh. 100,000 which comes
to Ksh. 1,000. Since the transaction is done to the bank, there is a cost of Ksh. 150 that the bank
charges to perform the transaction.
Total Cost: Ksh. 2,000 Plus 1% of Nominal Share Capital equals to Ksh. Ksh. 3,000 plus Ksh. 150
(Bank charge). The total comes to Ksh. 3,150.
The more you increase the nominal share capital, the more expensive the stamp duty becomes.
Remember, you are not expected to pay the Nominal Share Capital value, but the stamp duty cost
instead.
Apart from the cost breakdown above, you will require to allocate the shares to each company
directors (minimum 2 people) depending on what you have agreed. For example 60%-40% or 70%-
30% etc.
Here is to your success in setting up your company!