In 2019, the Companies Act 2015 (“the Act”) was amended. Under Section 93A of the amended Act, companies registered in Kenya are required to prepare and submit a copy of their beneficial ownership register to the Kenyan Registrar of Companies.
Learn more about Kenya’s beneficial ownership registers, the tax implications, filing requirements and the latest deadline extension here.
There are two main filing and compliance requirements for Kenyan companies:
- Companies are required to submit the beneficial ownership registers within 30 days of its preparation.
- Companies are also required to notify the Registrar within 14 days of any change in beneficial ownership information.
Filing in Kenya
In early 2020, regulations were published setting out the details required in the beneficial ownership register, as well as other compliance obligations.
However, Companies have not been able to comply with these requirements because no beneficial ownership register filing system was available within the Registrar of Companies system.
The beneficial ownership register filing system has now been operational as from 13th October 2020 and companies are therefore required to comply with same.
The Companies (Beneficial Ownership) Regulations (2020)
Who is a beneficial owner?
The Companies (Beneficial Ownership) Regulations (2020) (“the Regulations”) was published in February 2020.
The term “beneficial owner” is defined as “the natural person who ultimately owns or controls a legal person or arrangements or the natural person on whose behalf a transaction is conducted, and includes those persons who exercise ultimate effective control over a legal person or arrangement.”
This definition is broad as it covers both ownership and control.
Therefore, the Regulations will require the disclosure of the natural person(s) who control a legal person owning a company’s shares. Companies especially trusts will have to be careful when structuring matters as natural persons can contractually be granted control rights without enjoying any ownership rights.
How is beneficial ownership determined?
The Act does not provide for a specific threshold in shareholding or control in respect of which beneficial ownership information should be disclosed.
However, under the Regulations, beneficial owners are those who meet any of the following conditions:
(a) holds at least 10% of the issued shares in the company either directly or indirectly;
(b) exercises at least 10% of the voting rights in the company either directly or indirectly.
(c) holds a right, directly or indirectly, to appoint or remove a director of the company
(d) exercise significant influence or control, directly or indirectly over the company.
In addition to this, companies also have to take note of paragraph 32(1) of the Second Schedule of the Income Tax Act (Cap. 470).
There, “control” is defined as the holding of shares or voting power of 25% or more. This means that when filing beneficial ownership registers, companies may have to disclose beneficial shareholders who are actually not in a position of influence in the company
Content of Beneficial ownership registers
Companies shall take reasonable steps to identify beneficial owners and provide the following particulars:
- Full name
- The birth certificate number, national identity card number or passport number
- Personal identification number
- date of birth
- postal address
- business address
- residential address
- telephone number
- email address
- occupation or profession
- nature of ownership or control
- the date on which any person became a beneficial owner of the company
- the date on which any person ceased to be a beneficial owner
- any other relevant detail the Registrar may from time to time require.
- Greater filing and compliance requirements for Kenyan companies
2. As companies will now have to disclose even minor beneficial shareholders, it will be easier for the Kenyan Revenue Authorities to keep track of companies controlled by non-resident persons. Where a Kenyan company is deemed to be controlled by non-resident persons, it will have additional tax implications such as thin capitalisation and transfer pricing to consider.
Penalties For Non-Compliance
Although the Act does not set an exact date by which companies are required to submit their registers, compliance is required as soon as possible.
Failure to prepare and submit the beneficial ownership register renders a company non-compliant and hence it is an offence. As per a press release issued by the Business Registration Service, non-compliant companies will be liable to a fine up to KES 500,000 (approx. USD 4,800) upon conviction.
Latest news: Deadline extension
In a recent press release published on the 27th January 2021, the Business Registration Service says that it has taken note of the progress made in filling the beneficial ownership registers and in the spirit of encouraging compliance with the Act, it is granting a final grace period of six months until 31st July 2021 to file beneficial ownership registers.
This filing process is a simple process, and it is free of charge to file beneficial ownership registers. Any company officer/authorized person can file it here.