3 min read402 words
Succession issues are among the most emotional and can be legally complex. For family businesses — the engine of Kenya's SME economy — the stakes are even higher.
A founder who dies without a clear succession plan can destroy in weeks what took decades to build.
What happens if you die without a will in Kenya
Where a person dies intestate (without a valid will), their estate is distributed according to the statutory rules in Part IV. For a married person with children, the surviving spouse receives all household and personal effects, plus a life interest in the rest of the estate. The capital passes to the children on the spouse's death.
Business assets and succession
Business interests i.e. shares in a company, business name registrations, partnership stakes, form part of the estate and are subject to the same succession rules. A family business owned through a company is in a better position than one operated as a sole proprietorship, because shares can be transferred under a will or shareholder agreement without the entire business being frozen pending probate.
An interplay between the Law of Succession Act and customary law is a significant source of disputes and underscores why professional estate planning is essential.
A legally sound succession plan for a family business
- A valid will drafted and executed in accordance with PART II of the Law of Succession Act (two witnesses, signed in their presence). The will should address both personal and business assets.
- A shareholders' agreement with succession provisions specifying what happens to shares on death (e.g. buy-out by remaining shareholders at a formula price, right of first refusal to family members).
- For family businesses, a family governance policy setting rules for family member employment, dividend policy, and conflict resolution separate from the company's constitutional documents.
- Life and key-person insurance to fund a share buyout without liquidating the business on a founder's death.
- A trust structure which can hold business and personal assets, allowing them to pass outside of probate and with greater control over distribution timing.
We advise family-owned businesses at every stage from will drafting and shareholder agreement design to trust structures and probate administration. Counsel retainer arrangements are available for discussion.
Is your family business succession-ready?
Talk to us before it becomes urgent. A conversation now could protect generations of legacy, work and money.
Succession hub: Read Succession & Estate Planning in Kenya: A Practical Guide for Families →
Talk to Gallant before you make the decision
If this raises a question specific to your situation, we are glad to talk it through.
This article is general legal information, not legal advice, and does not create a lawyer–client relationship.