Many Kenyan startups incorporate and begin trading without a shareholders agreement in place — relying solely on their Articles of Association. This is a significant and often costly mistake.
Why Articles of Association Are Not Enough
Articles of Association are a public document that sets out only the basic governance framework of your company. A shareholders agreement, by contrast, is a private contract that can address commercially sensitive matters including founder vesting schedules, anti-dilution protections, reserved matters, drag-along rights, and exit mechanisms.
When Things Go Wrong
Without a SHA, disputes between co-founders or with investors are governed by default statutory rules that rarely reflect anyone’s actual intentions. The result is often expensive litigation and irreparable damage to the business.
