Establishing a startup is often fueled by a “move fast and break things” energy. But if there is one thing you shouldn’t break early on, it’s your capital structure.
As a founder, you aren’t just building your dream; you’re building a legal entity. The Kenyan Companies Act (No. 17 of 2015), specifically Sections 392 to 403, the law gives you flexibility to design how your company is owned and controlled.

As a rule of thumb, a Founder should keep this in mind; shareholding percentage reflects the economics, but shareholder rights gives power. Design your shareholding structure as if; You will succeed, You will raise capital and, You may one day exit. Different classes of shares can carry varying rights, such as voting power, dividend entitlements, or rights on winding up. This flexibility is vital for founders aiming to balance control, reward early contributors, and attract investors.

So the following are classes of shares that you can consider:
1. Ordinary shares- the basic of them all give equal rights to all shareholders unless further defined. They reflect the rosy start; alignment between founders, equality on dividends and equal risk to put skin in the game. However we know that the start up journey can get complicated real quick.
2. Founder Shares- This is the more proactive set up for future success:
a) Class A Ordinary Shares (The “Founder” Class)
As the vision-holder, a founder can use these to retain control. You can attach “weighted voting rights” to these shares (e.g. 10 votes per share) for a specific period. This ensures that even as you dilute your economic stake during fundraising, you retain voting control over key decisions like board appointments or other reserved matters.
b) Class B Ordinary Shares (The “Employee/Early Adopter” Class)
These are typically standard “one share, one vote” shares. They participate in the growth of the company but don’t carry the “super-voting” power of the Founder class, or their voting rights may be limited to certain matters. They can be tailored to vest over time so that sweat equity is built into them
c) Preference Shares (The “Investor” Class)
External investors may demand for these. They get priority on dividends and liquidation. They may also have limited voting rights.

If you have already set up the company with a simple ordinary share structure, the Companies Act provides a way to reorganise your share capital. Although it may require having hard conversations and negotiations. It can be done through seeking (75%) written shareholder consent, passing a special resolution at a general meeting and filing these documents with the Registrar within 14days of passing the resolution. If you expect pushback from shareholders, prepare adequately as the law also allows for an objection to be filed at the Court.

Reach out to us- we can help you figure this part out so that you remain fouder friendly and investor ready!