Introduction Tho Companios Act 2015 was enacted on 11 September 2015 and will replace the Companies ‘Act 1948, The commencement of the operative sections of the Companies Act 2015 will be by notice in the Kenya Gazette. As of the date of this review, no notice in this regard had been published and the Companies Act 1948 continues being the applicable law for the time being. ‘The Companies Act 2015 will introduce significant liabilities for non-compliance with the provisions of the Act by a company and its directors. The average fine under the Companies Act 2018 is between Kenya shillings two hundred thousand ‘and Kenya shillings one million. This represents a significant change from the Companies Act 1948, In which the fines average between Kenya shillings one hundred and Kenya shillings ten thousand. For purposes of this alert, we only highlight some ‘of the offences for which a company and its directors may be liable. ‘Offences and penalties ‘A company and each officer of the company who is in default is liable upon conviction to the following fines or imprisonment terms: A. Afine not exceeding Kenya shillings two hundred thousand (KES 200,000) when a ‘company: i. fails to file its amended articles of association with the Registrar not later than 14 days aftor the resolution containing the amendment is passed; Ii, does not file, within 14 days after the resolution or agreement is passed or made, the following resolutions and agreements with the Registrar: (a) special resolution, (bp) a resolution for voluntary liquidation; (©) a resolution passed regarding transfer of securities; (d) a resolution converting an old public company (although it is net clear what nature of company this Is) into a public company; (e) a resolution or agreement agreed to by all members or binding all members generally or binding members of a particular class; or (f) a resolution relating to the company's market or off-market purchase of its own shares; www.hhm.co.ke AHEM. Offences and penalties under the Companies Act 2015 in Kenya A review of the new Companies Aet, 2015 ~ 19 October 2015 lil, does not comply with the Registrar's direction to change its name where the Registrar is of the opinion that the name has been registered on the basis of misleading information or where the name of the company gives an indication of the nature of its activities that is so misleading as to be likely to cause harm to the public; iv, fails to notify the Registrar within 14 days after the appointment or resignation of a director or a change in a director's particulars or residential address; ¥. fails to keep available for inspection a copy of each director's service contract with a company or its subsidiary; Vi fails to file with the Registrar a return of allotment of shares within one month after making the allotment of shares; vil fails to file an annual return (or files one that does not comply with the prescribed particulars) with the Registrar, The company and each officer of the company that Is convicted of the above offences and continues to default commits a further offence and Is liable to a fine not exceeding Kenya shillings twenty thousand (KES 20,000) for each such offence on each day on which the failure continues. B. A fine not exceeding Kenya shillings five hundred thousand (KES 500,000) when a company: | fails to comply with a member's request for copies of the following: (a) the articles of association of the company; (b) any special resolution or agreement filed with the company (see paragraph (AY) above); (c) the current or past cettificates of incorporation of the company; (d) the current statement of the company’s capital where it has share capital or a statement of guarantee where itis limited by guarantee; and (e) a court order altering the company's constitution or sanctioning a compromise involving the company or facilitating reconstruction or amalgamation; li. fails to have its name legibly engraved on its common seal,NEWS ALERT HH&M Hamilton Harrison & Mathews oy October 2015 Offences and penalties under the Companies Act 2015 in Kenya (Continued) Arreview of the new Companies Act, 2015 ~ 19 October 2015 (Continued) ll, fails to: (@) display its name and other prescribed information in specified places; (b) state prescribed information in prescribed kinds of the company's documents and communications; (c) provide prescribed information on request to those with whom the company deals with in the course of its business, iv. fails to keep a register of members, to enter in its register certain prescribed information and to file a copy of the register with the Registrar within 14 days of its preparation or after making an amendment to the register, v. expunges an entry in its register relating to a member before the expiry of ten years after the date on which the person ceased to be a member; vi fails to keep a register of directors’ residential addresses that contains the usual residential address of each of the company's directors; Vil, falls to Issue notice of a general meeting in the manner and with the notice containing the prescribed particulars; vill. fails to keep copies of all resolutions of members passed at all general meeting and to keep such records for at least 10 years from the date of the relevant resolution, meeting or decision; ix. fails to issue a share certificate within two months after the allotment of or the transfer of any of its shares, For mast of the above offences, the company and cach officer of the company that is convicted of the offences and continues to default commits a further offence and is liable to a fine not exceeding Kenya shillings fifty thousand (KES 50,000) for each such offence ‘on each day on which the failure continues. .A fine not exceeding Kenya shi million (KES 1,000,000) when: 19s one ia company fails to keep a register of its directors which complies with the prescribed requirements and to keep such register open during ordinary hours for inspection by any member of the company or any other person; SANA AL LCE li. a director accepts a benefit from a third party where the benefit is attributable to the fact that the person is a director of the company or to any act or omission of the person as a director; lia director fails to declare an interest in a proposed or existing transaction or arrangement; iv.a person breaches a disqualification order or disqualification undertaking ie. an order disqualifying 2 person from acting as director, secretary, liquidator or administrator ‘or supervisor of a voluntary arrangement approved by a company; v.a person knowingly or recklessly authorises the inclusion of misleading, false or deceptive particulars in a register of secretaries. The person convicted of this offence is also liable to imprisonment for a term not exceeding two years; vi. a public company fails to hold a general meeting as its annual general meeting within six months from and including the day following its accounting reference date in each year, whether or not it holds other meeting during that period; vila company allots its shares at a discount; viii. a company exercises its power to subdivide or consolidate its shares ‘without its members having passing an ordinary resolution authorising it to do ix. the directors of a company make a solvency statement, which is filed with the Registrar," without having reasonable grounds for the opinions expressed in it; x a company (subject to cortain additional limitations in the case of a public company) makes a distribution other than out of profits available for that Purpose; xi. a public company conducts business or exercises a borrowing power without a trading certificate issued by the Registrar; keAw Ne a HH&M Hamilton Harrison & Mathews 04 | October 2015, Offences and penalties under the Companies Act 2015 in Kenya (Continued) A review of the new Companies Aet, 2015 ~ 19 October 2015 (Continued) xii, a person issues an offer document in relation to a takeover bid for a company whose securities (which also confer voting rights) are listed on a Kenyan securities exchange and the offer document does not comply with ‘the Takeover Rules. In the caso of a body corporate, the fine is Kenya shillings two million (KES 2,000,000); xilil_a company fails to keep proper accounting records and to keep those accounting records at its registered office, In the case of a body corporate, the fine is Kenya shillings two million (KES 2,000,000) and Kenya shillings ‘one million (KES 1,000,000) or imprisonment not exceeding two years or both in the case of a natural person; xlv, the directors of a company fall to prepare an annual financial statement and where the financial statement does not comply with the. requirements of the Companies Act, 2015; xv. the directors of a quoted company fail to prepare a directors’ remuneration report for each financial year of the ‘company and where the remuneration report does not comply with the requirements of the Companies Act, 2015 (on conviction for failure to Prepare the report, a director may also be liable to imprisonment for a term not exceeding three years); a person makes a statement or written Information or confirmations required by the auditor knowing that the statement is false or misleading in a material respect or recklessly without caring whether the statement is true or false (on conviction, the person may also be liable to imprisonment for a term not exceeding three years or both). A number of other offences exist in relation to the financial audit process; xvii. 2 company fails to guard against falsification of its records or to facilitate the discovery of falsification of those records, For some of the above offences, the company and each officer of the company that is convicted and continues to default commits a further offence and is liable to a fine not exceeding Kenya shillings one hundred thousand (KES 100,000) for each such offence ‘on each day on which the failure continues. Our review of the Companies Act 2015 continues ext week when we consider the minutes and resolutions of board and general meetings under the Companies Act 2015, For any further information regarding the Companies Act 2015, please write to your usual contact at HH&M or contact the following: Dr. Daniel W. Murlu, Partner dwanjau@hhm.co.ke ‘Sammy Ndolo, Partner sndoloahhm.co.ke The information contained iv this new alert for general information only and are not intended to provide legal advice. This alert prepare for the genera information of ou clients and other interested persons. Information contained inthis alert should not be acted upon in any specific situation without ‘appropriate legal advice. We do not accept responsiblity oF lability 10 users or any third pares in relation fo use ofthis nes alert or Us contents. All ‘copyright trademarks and other iillectal property nor arising out ofthe material herein vest solely in Hamilton Harrison & Mathews. www.hhm.co.ke