The Process Of Company Registration In Kenya
A company is a legal entity formed to engage in and operate a business, commercial or industrial enterprise. It is a unique entity with its own legal personality, rights and responsibilities separate from its members. The regime for the registration and regulation of company activities in Kenya is provided under the Companies Act. The Companies Act provides for both private and Public Companies. In this article we will review the process of registering a Private Limited Company in Kenya.
When incorporating a private limited company, you have the option to choose between a company limited by shares or a company limited by guarantee. A company limited by shares is usually ideal for businesses and commercial enterprises, whereas a company limited by guarantee is preferred for non-profit making organizations, such as NGOs and foundations.
- Choosing The Name
Every company must have a unique business name. When choosing a company name, one is required to check the availability of their preferred name through conducting a name search. Once the name has been selected, it is submitted alongside 4 other potential names in order of preference, and the top available name from the list will be assigned to the company. In the event that the selected names are rejected by the Registrar of Companies or unavailable due to belonging to another business the next available name from the list will be selected.
- Identifying The Nominal Capital
Nominal capital refers to the total value of shares that a company is legally permitted to issue. Every company must declare its nominal capital in a nominal capital form that is signed by the shareholders when submitting the registration documents. For most organizations, the law does not specify a minimum nominal capital, however for companies in financial services or capital markets there are statutory capital requirements that must be met in this regard during incorporation.
- Providing A List Of Shareholders & Classification Of Shares
A company must have at least one shareholder at the time of registration. Shareholders in a private company can either be individuals or corporate entities. Individual shareholders may either be Kenyan citizens or foreigners. There is no mandatory requirement for local shareholders, except in regulated industries such as the telecommunications industry whereby the Communications Authority required certain companies to have local shareholding.
When conducting the Application, it must indicate the class of shares each shareholder holds; which can either be ordinary shares or preferential shares. Ordinary shares are a class of shares that bestows no special rights interests to their holder whereas preferential shares bestow special rights in regards to dividend sharing and in the event of insolvency proceedings.
When conducting Company registration, shareholders must provide their passport copies, residential addresses, nationality details, date of birth, occupation, email, and phone details. If the company is a subsidiary of another, the corporate shareholder must also provide incorporation documents from its country of origin and details of directors and ultimate beneficial owners. A register of members, listing all shareholders, must also be submitted at incorporation.
At incorporation, companies must also disclose all ultimate beneficial owners who hold 10% or more of the company’s shares. These are people or entities that control the company, either directly or indirectly through various means, such as holding a significant percentage of shares, voting rights, or other means that confer influence over the company’s decisions and operations. For companies with corporate shareholders, details of the ultimate beneficial owners of those corporate shareholders must also be provided. Beneficial owners must submit copies of passport photos, residential addresses, nationality details, date of birth, occupation, email, and phone details.
- Registration Of Directors
At the point of registration, a company must have a minimum of one director who must have attained the age of 18 years and above. This person can either be a Kenyan or foreign national. However, a company with a foreign director will often need a local director for tax registration purposes, as a company’s tax registration is linked to the local director’s KRA PIN number.
When conducting company registration, the intended directors must provide their passport copies, residential addresses, nationality details, date of birth, occupation, email, and phone details during incorporation. Once the company it is registered, it can decide whether to formalize the director’s terms of appointment in a director’s service agreement, outlining their rights and responsibilities to avoid challenges during operation.
- Drafting Of The Articles Of Association
When registering a company, it must have Articles of Association. Articles of association are a document that outlines the rules and regulations governing the internal management of a company. They form a key part of the company’s constitution, along with the memorandum of association. During registration, you can either adopt the model articles under the Companies Act or draft your own. If you choose to draft your own, these articles must be submitted to the Companies Registry during incorporation.
- Submission To The Registrar Of Companies
Once the statutory forms for registration are signed by shareholders and directors and submitted, along with necessary documents such as passport copies and photos of directors. If there are no issues or errors with the application, the Companies Registry will issue the certificate of incorporation and the CR 12 document, summarizing shareholders and their holdings, directors, the company address, name, and registration number.
If there are queries/ issues with the application, the Companies Registry may request additional documents or clarifications from the Applicant. Once these are provided, the application will be processed, and the registration documents issued. Alternatively, corrections may be requested, and upon their completion, the registration certificate and CR 12 will be issued.
Conclusion
The process of company registration is relatively easy in that has been made simpler by online registration through the Business Registration Service. It is important that business persons understand the kind of business vehicle they are selecting when choosing to register a private company to in order to protect their interests. By choosing the right structure and ensuring proper registration, businesses can lay a strong foundation for future growth and success.
DATE: July 31, 2024, BY: ANNE GATHIRWA
For more insights pertaining to this matter, you can reach the writer at annegathirwalaw@gmail.com. You can also contact us at MMS Advocates, Lower Duplex Apartments, LOWER HILL ROAD, or email us at info@mmsadvocates.co.ke.