Every Company at a point will require growth. Depending on the size of the company, investments may be required in the form of either equity (shares) or debt (loans). If the investment is acquired in the form of debt, then a financial institution may be resorted to on terms and conditions to be agreed between the institution and the company.

Some companies also prefer raising funds through equity by selling off their shares in other companies or issuing out new shares to other entities. Depending on the regulation of the company, where an existing shareholder decides to sell off its shares in an existing company, it must first offer the shares to other members of the company on terms and conditions before offering them to third parties if the members refuse the offer.

For this article, consideration will be given to all the requirements needed by either individuals or cooperate entities that are considering the acquisition of shares in other companies from existing shareholders.

Approved Resolution by the Selling Entity


Where the selling entity is a cooperate body, it must support the sale of its shares with a board of directors’ resolution approving the sale of shares. The directors are the governing minds and decision-makers of the company and the sale of shares (interest) in a company, being a material decision, must be supported with their approval.

The board resolution will usually approve the share transfer, resolve to issue a new share certificate to the buyer, cancels the certificate of the seller and amend the register of members of the company effective from the date of the transfer of the shares.

A special resolution will, however, be required where the company is issuing out new shares out of its authorized shares to third parties.

Approved Resolution by the Purchasing Entity


Likewise, the purchasing entity, if a corporate body, will require a board of directors’ resolution approving the purchase of shares from the selling entity. These resolutions must name the authorized signatory approved by the board to execute all documents necessary for the completion of the transaction.

Execution of Share Purchase Agreement


Both the selling and purchasing entity must execute a Share Purchase Agreement (“SPA”) detailing the terms and conditions of the contract. The SPA will indicate the number of shares being transacted and the consideration (monies) payable by the purchasing entity. It further defines the mode and agreed payment terms between the parties. It must be noted that only the authorized signatory must sign the SPA and it has to be stamped with the official stamp or seal of both the selling and purchasing entities.

Stamping of the Share Purchase Agreement


Following the execution of the SPA by both parties, the document must be stamped at the Lands Valuation Department of the Lands Commission. The SPA is a chargeable instrument and it is required to be assessed and stamped under the assessment. The amount chargeable is usually meagre and further to this, during the registration at the Registrar Generals Department (“RGD”) only stamped SPA’s will be accepted.

  • Issuance of Share Certificate


Any Company shall within two (2) months after issuing out shares to an entity or individual must issue out a Share Certificate evidencing the transaction. The Share Certificate must be certified by one director and the secretary with an official company seal or stamp on the certificate. The certificate usually indicating the number and class of shares, amount of money paid or which remains payable and the name and address of the shareholder.

The Share Certificate is necessary as it is official evidence of ownership of the shares by the shareholder. Statements made in a share certificate under the common seal of the company or as certified by two directors and the Company Secretary of the company are prima facie evidence of the title to the shares of the person named in the certificate as the registered holder and of the amounts of money paid and payable on the certificate

Registration of Interest (Shares) at the Registrar Generals Department (RGD)


After the successful execution of the SPA and the issuance of the share certificate, the purchaser of the shares must take steps to register its interest at the RGD. The documents required to be presented are the approved resolutions from both the seller and the purchaser, the stamped SPA between the parties and the share certificate issued to the purchaser of the shares.

After the successful registration of interest at the RGD, the RGD will amend the profile of the company to reflect the new shareholding structure. The company must also take steps to amend its register of members and cancel the share certificate of the seller.

Again, the company must ensure that the changes to its shareholding structure are reflected during the filing of its annual returns at the RGD.

The acquisition of shares is relevant and must be done with all the necessary due diligence required for any business transaction.

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