Corporate Structures: Estate of a Deceased Shareholder

Judicial Precedent: News Alert

Estate of a Deceased Shareholder

A Succession Court has limited jurisdiction when addressing the distribution or preservation of a deceased Estate, in this case, on matters touching on shares. If there is no dispute on the distribution of the shares, the Succession Court will proceed to determine availability and distribution. However, where there is a difference of opinion on distribution because of a lack of clarity on ownership of an organization that the deceased was a shareholder or a case of intermeddling, the best the Succession Court will do is to stop intermeddling to preserve the Estate while the parties engage the appropriate Court to address the arising concerns on corporate structure, ownership or operational factors.

The Estate of a Deceased Shareholder only has the right to the company’s shares. This means a company’s assets (other than shares) cannot be considered part of the deceased’s Estate.

Information derived from: Pacific Frontier Seas Ltd v Kyengo & another (Civil Appeal 32 of 2018) [2022] KECA 396 (KLR) (4 March 2022) [2022] KECA 396 (KLR)

Parting Shot

Generally, there are many instances when there have been cases in Court touching on the fraudulent transfer of shares. Also, while noting that aspect and the activation of the Companies (Beneficial Ownership Information) Regulation, 2020, it means that Beneficial Owners, more so those without a Will, need to relook their Estate Planning strategies since the shares that would have been distributed to their beneficiaries might be lost for lack of disclosure or knowledge to third-parties.

It is undeniable that the Companies (Beneficial Ownership Information) Regulation, 2020, provides for government agencies to share Beneficiary Owners’ information on specific reasonable grounds, which may allow National Police Service to investigate a matter; however, one can save time with precise Estate Planning models.

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