A foreign investor can own 60 percent of a company and still discover that a decision cannot be made alone. Another person can appear as the registered shareholder while holding shares for somebody else. A director can run the company every day without owning a single share. These situations often look contradictory only because three different legal ideas are being mixed together: share ownership, management authority and beneficial ownership.

For an ordinary business owner, the safest starting point is to stop asking only, “Who owns the company?” The better questions are: who owns which shares and voting rights, who sits on the board and can bind or manage the company, who can appoint or remove directors, which decisions are reserved to shareholders, and who ultimately benefits from or controls the company even if that person is not named on the share certificate? East African company laws increasingly require these questions to be answered separately.

A shareholder owns shares, not the company’s daily decisions

A shareholder is a member or equity owner of the company. The shares may carry voting rights, dividend rights, rights to capital on liquidation and sometimes special rights that differ from those attached to other classes of shares. That means the number written on a share certificate is only the beginning of the control analysis. A person holding 40 percent of the shares may have 40 percent of the votes, but that is not automatic where the constitution creates different classes or special voting arrangements. A shareholder agreement may also reserve particular matters for a stated majority or for the consent of named investors, subject to the mandatory rules of the relevant company law.

The practical consequence is important. Shareholders normally make decisions that the law or the company’s constitution places at member level. These can include changing constitutional documents, altering capital, removing or appointing directors in the circumstances provided by law, approving specified transactions or taking other decisions requiring an ordinary or special resolution. They do not normally sit in the company’s office approving every contract, payment, employee decision or purchase merely because they own shares.

Kenya illustrates the distinction clearly. Under the model articles in the Companies (General) Regulations, the directors are responsible for managing the company’s business and affairs and may exercise the company’s powers. Members retain a reserve power to direct the directors by special resolution, but that does not turn every shareholder into a manager. Kenya’s Companies Act also distinguishes an ordinary resolution, generally decided by a simple majority of votes cast, from a special resolution requiring at least 75 percent. A foreign investor with 51 percent may therefore control many ordinary shareholder votes while still being unable to pass a 75 percent special resolution alone.

A director manages for the company, not for the shareholder who nominated them

A director is an office-holder responsible for company management under the statute and the company’s constitutional arrangements. The board may approve contracts, appoint managers, oversee accounts, authorize borrowing and make strategic or operational decisions where those powers have not been reserved to shareholders. The exact allocation depends on the applicable law, the articles and any valid shareholder arrangements.

Foreign investors often misunderstand nominee or investor-appointed directors. A shareholder may negotiate the right to nominate a director, but once appointed the director’s legal duties are owed in the capacity of director. The director is not simply an agent who must obey the shareholder who nominated them regardless of the company’s interests or the law. Equally, having one board seat does not necessarily give the investor control. Board size, quorum, chairperson powers, voting rules, delegation to executives and reserved matters can all change the practical result.

There is also a second risk: a director can sometimes be removed through shareholder voting even if a private agreement said that the person would remain in office. Kenya and Uganda both contain statutory mechanisms permitting removal of a director by ordinary resolution notwithstanding contrary provisions in an agreement, subject to the procedures in their respective laws. Mainland Tanzania’s Companies Act, Cap. 212 Revised Edition 2023, likewise contains a statutory director-removal mechanism. The lesson for a foreign investor is not that board nomination rights are useless. It is that board protection should be connected to the voting structure, quorum, replacement rights, reserved matters and the consequences if the agreed director is removed.

A beneficial owner may be invisible on the share certificate

Beneficial ownership answers a different question: which natural person ultimately owns, controls or benefits from the company? The registered shareholder and the beneficial owner can be the same person, but they do not have to be. Shares might be registered in the name of a nominee, holding company or other intermediary while another natural person ultimately exercises the economic interest or effective control.

This distinction has become much more important across East Africa because company registries increasingly require beneficial-ownership information. It is therefore dangerous for a foreign investor to inspect only the register of shareholders and assume that every person with real influence appears there.

In Kenya, the Companies (Beneficial Ownership Information) Regulations, as amended in 2023, treat a natural person as a beneficial owner where the person directly or indirectly holds at least 10 percent of issued shares, exercises at least 10 percent of voting rights, has the right to appoint or remove a majority of the board, or exercises significant influence or control. Business Registration Service guidance makes the practical point even clearer: significant control can include a founder, key investor or other person whose directions the board habitually seeks before material decisions. Control is therefore wider than registered ownership.

Uganda uses a broad control-based definition. The Companies Act, as consolidated to 31 December 2023, defines a beneficial owner as the natural person with final ownership or control, the person on whose behalf a transaction is conducted, or a person exercising ultimate control. Companies with beneficial owners must maintain a beneficial-owner register, and the Companies (Beneficial Owners) Regulations 2023 prescribe the information to be recorded and notified. Uganda does not simply make the share certificate the final answer to who controls the company.

Rwanda also separates formal shareholding from beneficial ownership. Law No. 007/2021 governing companies was amended by Law No. 019/2023 to strengthen beneficial-ownership records. Registrar General Instructions No. 001/2023/RG set a 25 percent minimum threshold for identifying a beneficial owner through shares, capital contribution or voting rights, while the amended company law also addresses other forms of control. The Office of the Registrar General currently requires supporting material such as proof of shares, voting rights, senior managerial position or other evidence explaining the nature and extent of the beneficial interest. A foreign investor should therefore check both the shareholding records and the beneficial-ownership record rather than treating them as substitutes.

Mainland Tanzania similarly requires companies to keep records of members and beneficial owners under the Companies Act, Cap. 212 Revised Edition 2023. The Companies (Beneficial Ownership) Regulations 2021 focus on the natural person who ultimately owns or exercises substantial control, receives substantial economic benefit, acts through an arrangement or exercises significant influence or control. BRELA’s current 2026 company forms expressly distinguish a registered shareholder who does not hold the beneficial interest from a beneficial owner whose name is not entered in the register of members. That distinction should be taken seriously whenever shares are held through another person.

Why majority ownership may still fall short of control

Suppose a foreign investor buys 60 percent of the ordinary shares and a local partner keeps 40 percent. At first glance the foreign investor appears to control the company. But the legal result depends on the documents. If ordinary shareholder decisions require a simple majority, 60 percent may be enough for those matters. If changing the articles requires a 75 percent special resolution, it is not. If the shareholders agreed that borrowing, disposing of major assets, changing the business, issuing new shares or appointing the chief executive requires both investors’ approval, the 40 percent shareholder may have a contractual veto over those reserved matters. If the board has four directors, each side appoints two and board decisions require a majority, neither side controls routine management when the directors disagree.

The reverse can also happen. A person may own only a minority of shares but possess rights that create substantial influence: the right to appoint most directors, veto particular strategic decisions, control financing or cause the board to follow that person’s directions. Beneficial-ownership rules are designed partly to identify this reality behind formal percentages.

This is why foreign investors should avoid using the phrase “I own the company” as if it answered every governance question. Ownership, voting power, board control, contractual vetoes and beneficial ownership should be mapped separately.

The control check a foreign investor should perform

Before buying shares or entering a joint venture, the investor should put four documents side by side: the current register of members, the company’s articles or constitution, any shareholder agreement and the beneficial-ownership record. The investor should then test the same proposed decision against each document. For example, ask who can appoint the board, how many directors form a quorum, whether the chair has a casting vote, what percentage is required for shareholder resolutions, whether any class of shares has special rights and whether particular matters need unanimous or supermajority approval. This simple exercise often reveals more than reading the percentage shareholding alone.

The next check is to compare paper rights with actual practice. Board minutes, shareholder resolutions, bank mandates and key contracts can show who has really been making decisions. If one person who is not a registered shareholder repeatedly approves financing, directs the board or controls the company’s money, that may raise governance and beneficial-ownership questions. The point is not to assume wrongdoing. It is to make sure the legal records describe the actual control structure.

A foreign investor should also verify whether the rights being negotiated can survive future changes. If a board seat is important, the documents should address replacement of that director. If a veto is essential, the reserved matter should be precisely defined. If dilution could destroy a voting position, pre-emption or consent provisions may be needed. If a local partner is holding shares for another person, the beneficial ownership position must be disclosed and understood. These protections need local legal review because shareholder agreements cannot safely be drafted as though mandatory company-law rules do not exist.

Country-specific records should be checked with the relevant registry. In Kenya, the Business Registration Service maintains company and beneficial-ownership filing systems. In Uganda, the Uganda Registration Services Bureau administers company records and beneficial-owner filings. Rwanda’s Office of the Registrar General provides company and beneficial-ownership registration requirements, while mainland Tanzania’s BRELA currently publishes the Companies Act Revised Edition 2023, beneficial-ownership regulations and updated 2026 company forms. A registry extract is useful, but it should be reconciled with the company’s internal registers and constitutional documents because not every governance right will appear on a basic search result.

The practical lesson

Company control is not a single legal switch. Shareholders provide capital and exercise the rights attached to their shares. Directors manage the company within the powers given by law and the company’s constitution. Beneficial owners are the natural persons who ultimately own, benefit from or control the structure, even where formal records place shares in another name. Sometimes all three roles sit in one person. In a joint venture or investment structure, they frequently do not.

For a foreign investor, the safest question is therefore not “How many shares am I buying?” It is “Which decisions will those shares actually allow me to make, which decisions belong to the board, which decisions require another shareholder’s consent, and who else has ultimate control?” A careful answer requires reading the articles, shareholder agreement, board arrangements, share classes and beneficial-ownership record together. That is the difference between buying an economic interest and understanding who really controls the company.

Source note. This article is based on Kenya’s Companies Act 2015, the Companies (General) Regulations 2015 as revised, the Companies (Beneficial Ownership Information) Regulations 2020 as amended in 2023, and Business Registration Service guidance on beneficial ownership; Uganda’s Companies Act 2012 as amended and consolidated to 31 December 2023, the Companies (Beneficial Owners) Regulations 2023 and Uganda Registration Services Bureau materials; Rwanda’s Law No. 007/2021 governing companies, Law No. 019/2023 amending the company law, Registrar General Instructions No. 001/2023/RG on the beneficial-owner threshold, and Office of the Registrar General guidance; and mainland Tanzania’s Companies Act, Cap. 212 Revised Edition 2023, the Companies (Beneficial Ownership) Regulations 2021 and BRELA’s Companies (Forms) (Amendment) Rules and forms published in 2026. Laws and official materials were checked on 2 September 2026.

Suggested citation:

Ronald Serwanga, “Company Control Guide for Foreigners in East Africa” East Africa Legal Insight (3 September 2026).