HOW TO PURCHASE AND TRANSFER SHARES IN APRIVATE COMPANY IN RWANDA.
GOVERNING LAW,
• THE CONSTITUTION OF THE REPUBLIC OF RWANDA
• LAW NO 007/2021 OF 05/02/2021 LAW GOVERNING COMPANIES
• AMONG OTHERS.
Shares are units of ownership interest held by a person in particular company
A transferee is the person to whom shares are being transferred to.
A Transferor is a person who is transferring shares to somebody else
Shareholder is a person holding/owning a share(s) in a company
The shares of any member in a company are movable property transferable in the manner provided by the Articles of Association of that very company in which shares are held.
Unless the articles of association of that company provides otherwise in regard to sale and transfer of shares,
a) First consult with transaction lawyer about the company’s desire to purchase shares of a particular company for legal guidance and or direction
b) Conduct due diligence including search at the company registry and physical address of that company to ascertain its existence, the liabilities if any, ownership, and its general status as far liquidation is concerned,
c) Have look at company documents i.e. memorandum and articles of Association, company annual returns, filled return of allotment, previously filled annual returns, minutes of AGM meetings among others.
d) While perusing through Articles and memorandum of association look for how the business of that company is governed.
e) Assuming all is well with your due diligence conducted; proceed to negotiate for the number of shares you want to buy from the shareholder or his authorized agent.
f) Sometimes it is good to conduct valuation of those shares
g) In the event that you agree on the terms, proceed to reduce those terms and conditions in writing (shares purchase/sale agreement).
h) Where Articles of Association of the company provides for passing of a resolution authorizing the sale, the resolution should be passed before executing shares sale/purchase agreement in the manner prescribed.
i) The resolution should then be passed and registrar of companies notified his about the decision of the company to sale some shares.
j) At the time of signing the shares sale/purchase agreement the shareholder of the shares must sign a transfer of share form/instrument transferring the agreed number of shares to the purchaser/transferee and the purchaser/transferee has to accept by appending his signature.
k) Thereafter the transferee submits fully executed transfer of shares form to gather with the share purchase/Sale agreement and share certificate if any to the company for purposes of making the new changes accordingly or the transferor requests the same to be done.
l) Upon the company receiving the transfer form or a request to transfer the said shares, the company has to verify the submitted documents.
m) The company shall then decide whether to accept ,refuse or delay the transfer
n) In the event that the company rejects the transfer the Board of Directors shall resolve within thirty (30) working days of receipt of the transfer to refuse or delay the registration of the transfer, and the resolution sets out in detail the reasons for doing so
o) The company shall then send the notice of the resolution including the reasons to the transferor and the transferee within five (5) working days of its adoption by the Board of Directors
p) Where the company accepts to transfer the purchased shares, it will have to make entries in its register of shareholders the name of the transferee as holder of the shares
q) The company shall proceed to allot the shares to the purchaser accordingly stating the number and nominal amount of the shares comprised in the allotment, the names, addresses and descriptions of the allottee and the amount if any, paid or due and payable on each share
r) The company has to prepare certificate of shares in favor of the purchase /transferee.
s) The purchaser or his authorized agent checks with the company to pick certificate of shares in respect to the purchased shares.
t) The transfer of shares, return of allotment, among other are filed at Registrar of companies (RDB) as stipulated by the law.
approximate cost:5%-10% of the value of the shares purchased but not less than ugx 1000,000
Author is A regional transactions legal consultant (ADVOCATE) at NOA REGIONAL ASSOCIATED ADVOCATES AND LEGAL CONSULTANTS
Email address: onlinetransactionconsultancy@gmail.com.
contacts. +250787311255,+256788105242,+256782105042
What sup +250787311255
NOTE: whereas the author has made necessary efforts to ensure the accuracy of this post, it is not intended to provide specific legal advice to a particular individual as individual situations may differ.
For specific technical / legal transaction advice on this subject matter and related subject, you may contact the author at online consultancy fee, or contact any transaction legal consultant of your choice.
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