How to Gift NSE Shares in Kenya

Kenyans who own shares in various companies listed on the Nairobi Securities Exchange (NSE) can gift those shares to a close family member without selling them.

According to the Central Depository and Settlement Corporation (CDSC), investors can transfer shares to their spouse, parents, siblings or children. The shares can also be transferred to a minor, provided the child has a junior CDS account.

In this article, we explain how to gift NSE shares, what happens when you transfer shares to a child, the fees involved and how to transfer shares belonging to a deceased investor.

Also Read: CSD vs CDS: Two Accounts You Need to Invest in Shares and Bonds

How to Gift NSE Shares

CDSC allows investors to privately transfer shares to close family members, including a spouse, parent, sibling or child. The process involves the investor who owns the shares, their stockbroker or custodian bank, the recipient's broker or custodian where applicable, and CDSC. Here are the steps to follow:

1. Fill in the Private Transfer Form

The investor who owns the shares visits their stockbroker or custodian bank and fills in the Private Transfer Form (CDS 7).

The CDS 7 form is used to facilitate the private transfer of shares.

2. The broker verifies the documents

The stockbroker or custodian bank verifies the authenticity of the form and supporting documents, signs the form and returns the relevant copies to the investor.

3. The form is sent to the recipient's broker, if necessary

If the person giving the shares and the recipient use different stockbrokers or custodian banks, the transferor's broker sends the completed documents back to the investor for onward transmission to the recipient's broker or custodian.

4. The receiving broker reviews the transfer

The recipient's stockbroker or custodian reviews the transfer details and supporting documents, accepts the transfer and forwards the documents to CDSC.

5. CDSC reviews the request

CDSC reviews the documents and either approves or rejects the transfer.

6. The shares are transferred

If the transfer is approved, CDSC moves the shares from the giver's CDS account to the recipient's account.

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Gifting NSE Shares to a Minor

CDSC allows shares to be transferred to children below the age of 18. However, the child must first have a junior CDS account before the shares can be transferred.

The transfer process is otherwise similar to that of transferring shares to an adult.

This means parents or guardians can, for example, transfer shares to a child as a long-term investment rather than selling the shares and giving the child the cash.

Costs

The cost of transferring shares as a gift depends on the value of the transaction.

According to CDSC:

1. Shares worth less than Ksh10,000: No charge is payable.
2. Shares worth more than Ksh10,000 but less than Ksh100,000: A fee equivalent to 45% of 2.1% of the transaction value applies.
3. Shares worth more than Ksh100,000: A fee equivalent to 45% of up to 1.5% of the transaction value applies.

Your stockbroker or custodian may also charge fees for processing the private transfer.

How to Transfer NSE Shares Belonging to a Deceased Investor

What happens if someone dies while holding shares?

The shares do not simply disappear. They form part of the deceased person's estate and can be transferred to the beneficiaries through the appropriate succession process.

CDSC outlines the following process:

1. Confirm that the deceased owned shares

You can contact CDSC with the deceased person's full name and ID number to establish whether their CDS account has any holdings.

2. Obtain a letter from the local chief

The applicant is directed to the local chief in the area where the deceased was buried.

The chief provides a letter confirming the applicant's relationship to the deceased. The letter should include the name, ID number and relationship of the person claiming the shares.

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3. Request the deceased's CDS account statement

The letter is submitted to CDSC together with the death certificate and the beneficiary's national ID.

CDSC can then provide the deceased's CDS account statement.

4. Identify the shares and stockbroker

The CDSC statement shows the shares held by the deceased, their CDS account number and the stockbroker or custodian bank managing the account.

5. Obtain the required succession documents

The next step depends on the value of the shares.

If the shares are worth less than Ksh100,000, the applicant requires a Grant of Letters of Administration and an indemnity letter from the Deputy Commissioner's office.

Where the shares are worth more than Ksh100,000, the applicant can approach the Public Trustee. The Public Trustee may either issue the necessary letter or refer the applicant to court to begin the succession process.

Where the matter goes to court, the process ultimately results in a Grant of Representation and the relevant succession documents.

Also Read: What Happens to a Deceased Person’s M-Pesa Balance

6. Submit the documents to the deceased's broker

Once the required documents have been obtained, the applicant takes them to the stockbroker or custodian bank that managed the deceased's CDS account.

7. Complete the Private Transfer Form

The broker or custodian verifies the documents and provides the applicant with a Private Transfer Form (CDS 7).

If the applicant does not already have a CDS account, they will also need to open one.

The broker or custodian then attaches the supporting documents to the transfer form and submits them to CDSC.

8. CDSC processes the transfer

CDSC reviews the documents and processes the request.

If there are any issues, CDSC communicates them to the stockbroker or custodian, who then informs the applicant of any amendments required.

Note: CDSC processes transfer requests within 24 hours. However, the overall process can take longer where multiple parties are involved or where additional documentation is required.

Transfers involving a deceased investor may also take considerably longer because they can involve succession and estate administration processes.

Costs

According to CDSC:

1. Shares worth less than Ksh10,000: No CDSC charge.
2. Shares worth more than Ksh10,000: A CDSC fee of Ksh1,500 applies.

Stockbrokers and custodian banks may charge additional fees for processing private transfers.

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