Introduction
Pursuant to the Companies Act, 2015 as amended by the Statute Law (Miscellaneous Amendment) Act, 2019, read together with the Companies (Beneficial Ownership Information) Regulations, 2020 (the “Regulations”), every Company is required to keep a register of its beneficial owners and maintain a copy with the Registrar of Companies.
On 16th October 2020, the Registrar of Companies operationalized the Beneficial Ownership (“BO”) E-Register with effect from 13th October 2020.
Scope of Application
The requirement to register details of beneficial ownership apply to beneficial owners as defined in the Regulations of all companies in Kenya whether public or private and if private whether limited or unlimited, including companies that were formed before 2015. A beneficial owner is defined to mean ‘a 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.’ More specifically, the Regulations apply to a beneficial owner who:
- holds at least 10% of the issued shares in the company either directly or indirectly;
- exercises at least 10% of the voting rights in the company either directly or indirectly;
- holds a right, directly or indirectly, to appoint or remove a director of the company; or
- exercises significant influence or control, directly or indirectly, over the company. Significant influence or control under the Regulations means ‘the ability to participate in decision making when it comes to matters relating finances and financial policies of a company without necessarily having full control over them.’
The Registrar of Companies is requiring all companies to comply with the Regulations and submit their respective beneficial ownership registers to the Companies Registry’s BO Register within 30 days of its preparation.
Obligations of the Company
The Regulations requires companies to take reasonable steps to identify its beneficial owners and enter their details in its register of members. The particulars of its beneficial owners to be included in the register include:
- the full name;
- birth certificate number, national identity card number or passport number;
- personal identification number;
- nationality;
- 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 and/or ceased to be a beneficial owner; and
- any other relevant detail that the Registrar of Companies may from time to time require.
A copy of the company’s register of beneficial owners and any changes in details, needs to be lodged with the Registrar of companies within 30 days after its preparation. This process is online.
Notably, the Regulations also impose a duty on a company to investigate and obtain beneficial owner particulars where it has reasonable cause to believe that a person is a beneficial owner of a company. This is by giving the suspected owner notice to provide the information listed above. The person is then required to respond to the notice within 21 days. Where the person fails to respond to the notice, the company is required to issue and keep a copy of the warning notice in its register of beneficial owners, to restrict the relevant interest of a person where the failure to respond is within 14 days from the date of the warning notice, to note the restriction in the register and to file the same with the Registrar of Companies.
Where the company is unable to trace the beneficial owner, it is required to state that it has not identify the beneficial owner and therefore it has not been able to obtain his or her particulars, it has issued a warning notice that has not been complied with and that it has issued a restriction notice of the relevant interests.
Consequences of Non-Compliance
Failure to provide a register of beneficial owners effectively curtails the enjoyment of any rights or interest granted to that beneficial owner. Failure to register details of the beneficial ownership would nullify any transfer of the beneficial owner’s interests, no rights will be exercisable in respect of that interest, no shares may be issued under rights of the interest or in pursuance of an offer made to the interest holder, and no payment may be made of sums due from the company in respect of the interest.
Restrictions on disclosure of beneficial ownership details
The general rule is that beneficial ownership information shall not be made available to the public. The Regulations only permit disclosure:
- where it is for communication purposes with the beneficial owner for compliance with the Regulations;
- in compliance with a court order;
- upon the request of a competent authority such as the office of the Attorney General and an investigative agency; or
- with the written consent of the beneficial owner.
The Regulations make it an offence punishable by a fine not exceeding KES 20,000 or imprisonment for a term not exceeding 6 months, for the company to unreasonably disclose beneficial owners’ information.
Conclusion
MMS would be pleased to assist your company to comply with the requirements of the Regulations. For any enquiries, please contact us at info@mmsadvocates.co.ke.