The disclosure of beneficial ownership is a critical aspect of corporate governance and transparency in Kenya, especially in the fight against illicit financial activities such as money laundering, terrorism financing, and tax evasion. In a bid to align with international standards and ensure accountability, the Kenyan government, through the Business Registration Service (BRS), has implemented strict regulations governing the disclosure of beneficial ownership information (BOI) for companies and Limited Liability Partnerships (LLPs).
On 17 October 2024, the BRS issued a public notice, setting a firm deadline of 24 November 2024 for all companies and LLPs to file their beneficial ownership details. This directive emphasizes the need for compliance with Section 93A of the Companies Act, Cap. 486, and Section 31B of the Limited Liability Partnerships Act governs the preparation and filing of beneficial ownership information.
This article provides a detailed overview of beneficial ownership disclosure in Kenya, the legal framework, critical aspects of the BRS directive, the penalties for non-compliance, and how Njaga & Co Advocates can assist you in meeting the upcoming deadline.
Understanding Beneficial Ownership
In legal terms, a beneficial owner is a natural person who ultimately owns, controls, or benefits from a company, even if their name does not appear on formal documentation such as shareholder or director registers. Beneficial owners are those individuals who:
- Directly or indirectly hold at least 10% of the shares, voting rights, or dividends in a company.
- Exercise significant influence or control over the company’s decision-making processes or management, directly or indirectly.
- Have the power to appoint or remove the majority of the board of directors.
Identifying the beneficial owners of companies is crucial for transparency. It prevents individuals from hiding their control of businesses behind layers of corporate structures. This information is essential for combatting financial crimes and fostering trust in corporate activities.
Importance of Beneficial Ownership Disclosure
The rationale for beneficial ownership disclosure stems from the need for transparency, accountability, and the prevention of illicit activities such as money laundering, tax evasion, and terrorist financing. Beneficial ownership information helps regulators, law enforcement, and financial institutions track the actual owners of companies, thereby reducing the risk of companies being used as vehicles for illegal activities.
In Kenya, the past lack of clear disclosure requirements made it difficult to identify the individuals behind companies, especially in high-risk sectors like real estate, extractive industries, and financial services. This opacity allowed corruption, fraud, and illegal financial flows to thrive.
By enforcing beneficial ownership disclosure, Kenya is enhancing its reputation in the international business community and strengthening its internal mechanisms to combat economic crimes.
Kenya’s Legal Framework for Beneficial Ownership Disclosure
The legal basis for the disclosure of beneficial ownership in Kenya is rooted in the Companies Act (No. 17 of 2015), which was amended by the Statute Law (Miscellaneous Amendment Act) 2019. This amendment introduced the requirements for companies and Limited Liability Partnerships to maintain a register of beneficial owners. The Companies (Beneficial Ownership Information) Regulations, 2020 further detailed the procedures and requirements for compliance. Several key pieces of legislation govern the procedures and Kenya’s legal framework for beneficial ownership disclosure:
- Companies Act, Cap. 486: As amended, the Act requires companies to maintain and submit a Register of Beneficial Owners to the Registrar of Companies. Section 93A of the Act specifically focuses on the requirement for companies to provide accurate and up-to-date information about their beneficial owners.
- Companies (Beneficial Ownership Information) Regulations, 2020: These regulations operationalize the requirements of the Companies Act regarding the filing and updating of beneficial ownership information.
- Limited Liability Partnerships (LLP) Act, Cap. 30: This Act contains provisions similar to the Companies Act, requiring LLPs to file beneficial ownership information with the BRS under Section 31B of the LLP Act.
These laws mandate that all companies and LLPs in Kenya maintain a Register of Beneficial Owners and file this information with the Business Registration Service (BRS). Compliance with these requirements is essential for operating legally in the country.
Key Provisions of the Regulations
Some of the critical aspects of the beneficial ownership regulations include:
- Maintaining a Register of Beneficial Owners: All companies and LLPs must keep a record of their beneficial owners at their registered address. The register must include details such as the names, identification numbers, addresses, nationalities, and percentage of shares or voting rights held by the beneficial owners.
- Filing with the Registrar of Companies: Once the Register of Beneficial Owners is prepared, companies must file the information with the Registrar of Companies via the BRS. This filing must be done within the specified deadline, and any changes to the beneficial ownership must be reported within 14 days of the change.
- Confidentiality of Information: While the beneficial ownership information is filed with the Registrar, it is kept confidential and is only accessible to authorized individuals, including government agencies involved in law enforcement and regulatory oversight.
The 2024 BRS Directive: Deadline for Filing
In the recent public notice issued on 17th October 2024, the BRS has set a 24th November 2024 deadline for all companies and LLPs to file their beneficial ownership information. This deadline applies to all entities registered in Kenya and is a final call to comply with the regulations before enforcement action is taken.
The notice from, the Registrar of Companies, emphasizes the following:
- Mandatory Compliance: All companies and LLPs must submit their beneficial ownership details by 24th November 2024. This includes maintaining a Register of Beneficial Owners at their registered office and filing a copy of the register with the BRS.
- Striking Off for Non-Compliance: Failure to comply with the requirement to file beneficial ownership information for five years will result in the company or LLP being declared as not carrying on business and subsequently struck off the register under Section 894 of the Companies Act and Section 33A of the LLP Act.
- Penalties: Non-compliant companies will face heavy financial penalties. Failure to file the register attracts an immediate fine of Kshs 500,000, with an additional Kshs 50,000 fine for each day the default continues. Furthermore, failure to file amendments to the register within 14 days of changes will result in a fine of Kshs 2,000 per officer, plus an additional Kshs 100 for every day the default persists.
Penalties and Consequences of Non-Compliance
Companies and LLPs that fail to file their beneficial ownership information by the 24th November 2024 deadline face severe penalties, including:
- Initial Penalty: A fine of Kshs 500,000 for failure to submit the required information.
- Daily Penalty: A daily penalty of Kshs 50,000 for every day the information is not filed after the deadline.
- Fines for Officers: Company officers who fail to file amendments to the register within the required timeframe will face fines of Kshs 2,000 each, plus Kshs 100 per day for continued default.
- Striking Off: Persistent non-compliance can result in the company being struck off the register, effectively ending its legal status and ability to operate in Kenya.
How Njaga & Co Advocates Can Assist
At Njaga & Co Advocates, we recognize the importance of ensuring that your company fully complies with beneficial ownership disclosure regulations. Our experienced team of corporate lawyers is ready to assist you in meeting the 24th November 2024 deadline and avoiding the harsh penalties associated with non-compliance.
Here’s how we can help:
- Guidance on Compliance: We offer expert advice on how to prepare your company’s Register of Beneficial Owners, ensuring that the information complies with legal requirements.
- Filing Assistance: Our team will handle the entire filing process with the Business Registration Service (BRS) on your behalf, ensuring that your beneficial ownership details are submitted accurately and on time.
- Ongoing Updates: We provide continuous support to help you maintain an up-to-date register, filing amendments with the BRS as required within 14 days after any changes in ownership.
- Corporate Legal Advice: In addition to compliance services, we offer strategic legal advice to enhance your company’s governance structures and transparency, helping you maintain a strong reputation with regulators and investors.
- Representation in Case of Non-Compliance: Should your company face enforcement action or penalties for non-compliance, Njaga & Co Advocates will represent you and work to resolve the issue as swiftly and cost-effectively as possible.
Conclusion
The 24th of November 2024 deadline for the disclosure of beneficial ownership information is approaching fast. Companies and LLPs operating in Kenya must act quickly to comply with the BRS directive to avoid substantial penalties or the risk of being struck off the register. By partnering with Njaga & Co Advocates, you can ensure your business is fully compliant, protected, and well-positioned to continue its operations smoothly in Kenya.
Contact us today for more information on how we can assist you with beneficial ownership compliance. We look forward to partnering with you to achieve compliance and strengthen your corporate governance framework.