New

Regulations
Alert:
Beneficial
Ownership
edwin
Section 93A Of The Companies
Act, 2015
 Disclosure of Beneficial Ownership of Companies in Kenya
By Edwin N. Kimani of E.Kimani & Co. Advocates*

Background
The Statute Law (Miscellaneous Amendment Act) 2019 (SMAA) amended the
Companies Act (No. 17 of 2015), Laws of Kenya (the Companies Act) to require all
companies to introduce a register of beneficial owners. In order to give effect to the
amendment the Government enacted the Companies (Beneficial Ownership Information)
Regulations, 2020 (the Regulations) as subsidiary legislation to the Companies Act on 18
February 2020. The Business Registration Service (BRS) has since published a public
notice notifying all officers of companies and authorized persons that the beneficial
ownership E-Register (E-Register) has been operationalized with effect from 13 October
2020 (the Public Notice).

Definition of Beneficial Owner

The Companies Act defines a beneficial owner as “the natural person who ultimately owns
or controls a legal person or arrangements or a natural person on whose behalf transactions are
conducted, and include persons who exercise ultimate effective control over a legal person or
arrangement.”

Under the Regulations, a beneficial owner is a natural person who directly or indirectly:

 holds at least ten percent (10%) of the issued shares of the company;

 exercises at least ten percent (10%) of the voting rights in the company;

 holds the right to appoint or remove a director of a company; or

 exercises significant influence or control over a company.

Significant influence or control under the regulations means participation in the finances
or financial policies of the company.

Obligations of the Company

 Duty to Investigate the Beneficial Owner
The Regulations provide that a company has a duty to investigate and obtain the
particulars of a beneficial owner. The first step in the investigation is issuance of a notice
to the person they believe to be the beneficial owner of the company. A person issued
with this notice by the company is required to comply with the notice within twenty-one
(21) days from the date that the notice was issued. In case a person fails to comply with
the notice within time, the company shall issue them with a warning notice of fourteen
(14) days.

 Restriction of Persons Who Fail To Comply With the Warning Notice

If a person fails to comply with the warning notice within fourteen (14) days from the
date of issuance, the company shall restrict the relevant interest of the person. Thereafter,
the company files with the registrar a copy of the restriction issued fourteen (14) days
after issuance of the restriction.

The effect of the restriction is that:

 any transfer of interest by the person shall be void;

 the person shall not exercise his rights in respect to the interest;

 no shares shall be issued to the person in an allotment; and

 no payment shall be made to the person in respect of the interest he holds in the
company.
  Restrictions on Sharing Beneficial Ownership Information
In an effort to ensure that the officers of the company comply with the provisions of the
Data Protection Act, 2019, the regulations provide that the company should not disclose
the information of the beneficial owner to the public, unless the beneficial owner has
consented to the disclosure.

The beneficial owner information can only be disclosed for purposes of complying with
the Regulations, for purposes of communicating with the beneficial owners or in
compliance with a Court Order.

A person who discloses beneficial ownership information to the public risks a fine not
exceeding Kenya Shillings Twenty Thousand (KES 20,000) or imprisonment for a term
not exceeding six (6) months or to both.

Operationalization of Disclosure of Beneficial Ownership

Information
The Registrar of Companies announced through a Public Notice that with effect from
13th October, 2020 the beneficial ownership e-register is operational. As such, companies
are required to update their beneficial ownership e-register by 31st January 2021.
Therefore, company officers are required to take attendant steps to ensure compliance
with the provisions of the Act and the regulations. In summary some of the steps that
company officers could take include:

 Issuance of notices to the persons that can be termed as beneficial owners as per
the definition in the Act and the regulations;

 Adherence to timelines outlined in the regulations for example, timelines on

issuance of notices;

 Updating the e-register in case of any new information of beneficial owners;

 Updating the registrar of companies in case of any restriction measures placed on

beneficial owners; and

 Ensuring that the information of the beneficial owners is not disclosed to the public
without their consent, contrary to the provisions of the Data Protection Act.
Penalty In Case of Non-Disclosure by the Company
Under section 93A of the Companies Act, failure by a company to comply with the
disclosure requirements is an offence which on conviction attracts a fine not exceeding
Kenya Shillings Five Hundred Thousand (KES 500,000) payable by the company and each
officer of the company in default. Further, if the non-compliance continues, the company
and the officers shall be liable an additional fine not exceeding Kenya Shillings Fifty
Thousand (KES 50,000) per day.

What We Can Do For You

E. Kimani & Co. Advocates would be pleased to assist your company to comply with the
requirements of the Regulations. For any enquiries, please contact Edwin Kimani at
e.kimanilaw@gmail.com or +254727363338