What this is: Whether you're a seasoned investor or exploring new horizons, Kenya's thriving business environment welcomes you.
What this means: Before establishing operations in this dynamic market, there are crucial requirements to address, particularly regarding the registration of companies.
In recent years, investors have increasingly turned their attention to African markets, recognising the untapped potential and the technological advancements that have transformed the world into a global community. Among the many attractive investment destinations on the continent, Kenya stands out due to its strategic geographical location, offering access to East and Central Africa, the Middle East, Asia and parts of Europe. For investors eyeing expansion into the East and Central African regions, Kenya presents promising opportunities. However, before establishing operations in this dynamic market, there are crucial requirements to address, particularly regarding the registration of companies.
The Company: A Legal Entity
There are several corporate vehicles through which a business can undertake its activities depending on its needs and objectives.
A company is an ideal vehicle for carrying on business due to its separate legal personality which protects shareholders in the event of loss or liability by the company. The principle of separate legal personalities was birthed in the landmark UK company law case of Salomon v Salomon (1897) which established the concept of the corporate veil. Since the company is a separate juristic person from its members/shareholders, it can enter into agreements in its own name and is liable under the agreement thus prohibiting the court from piercing the corporate veil. This principle is, however, not absolute, as the court is mandated to pierce the veil in certain instances where the members are using the company as a sham to undertake illegal activities.
Understanding the Regulatory Framework
In Kenya companies are regulated under the Companies Act No. 17 of 2015 by the Registrar of Companies through the Business Registration Service (BRS), a State Corporation. The Act provides for various types of companies, limited and unlimited companies, private and public companies and foreign companies.
A company is limited if the liability of its members is limited by the Articles of the company. It may be limited by shares or limited by guarantee. If it is limited by shares, it means that a member's liability is limited to the extent of their unpaid shares and if it is limited by guarantee, it means that a member’s liability is limited to the extent of the amount the member undertook to contribute to the assets of the company in the event of liquidation.
Alternatively, a company is unlimited if there is no limited to the liability of its members. In the event of liquidation of such a company, the creditors are free to pursue the individual members in case the company’s assets are not sufficient to offset its liabilities. This is due to the fact that the Companies Act imposes less stringent regulations to unlimited companies as they are exempted from filing financial statements by the Registrar.
On the other hand, a company is a public company if its Articles limited the liability of its members either by shares or guarantee. The Articles of a public company allow its members to issue shares to the general public and may be listed at the Securities Exchange. Listed Companies are subject to further regulations under the Capital Markets Authority Regulatory Framework.
A foreign company is a company that is incorporated outside Kenya and registered to undertake business in Kenya under the Companies Act. According to the Act, any foreign company incorporated outside the country must register and obtain a certificate of compliance to conduct business within its borders. This requirement ensures transparency, accountability and legal adherence for foreign entities operating in Kenya.
These types of companies are similar to the ones provided for in the United Kingdom Companies Act of 2006, Cap 46 with the exception of Community-owned Companies which are not provided for in the Kenyan Act.
When it comes to the number of shareholders that a company may have, the Companies Act of Kenya allows for at least one natural person. However, a private company may have a juristic person as a shareholder but can only have up to 50 members in total. There is no limit to the number of members in companies that are unlimited, limited by guarantee or public companies.
As for directors, a private company may have one director while a public company and a company limited by guarantee must have at least 2 directors. One director must be a natural person above 18 years of age.
Registration Process
With the advent of technology, registration of companies in Kenya is now a fully automated service through the e-citizen platform that is linked to the BRS system, which hosts the Companies Registry.
This process can be initiated by legal practitioners as well as practicing company secretaries through their own e-citizen access, on behalf of their clients.
Registration of Private Limited Companies
The following documents are required to register a private limited company:
- At least 3 name options for the company. This should be in line with the provisions of the Act on name requirements.
- Articles and memorandum of association.
- Particulars of directors and secretaries.
- Statement of nominal capital.
- Details of residential address of the directors and secretaries.
- Copies of National Identity Cards for directors and secretaries.
- Passport-sized photos for directors and secretaries.
- Payment of requisite fees.
The requirement for having a company secretary is mandatory for all public companies. However, for private companies, only those with a share capital of more than KES 5,000,000 are required to have a company secretary. It is, however, good practice and in line with good governance for companies to have a company secretary, qualified and registered with the Institute of Certified Secretaries of Kenya.
Once the application is approved, the Registrar issues a Certificate of Incorporation, which is conclusive proof of registration of a company.
Registration of Foreign Companies
Essential documents required for registration of a foreign company include:
- Certified copy of the foreign company's current Certificate of Incorporation or registration in its place of origin.
- Certified copies of the constitutive documents of the foreign company.
- List of all Directors and Shareholders of the foreign company and their personal details.
- Memorandum outlining the powers of any Directors residing in Kenya and forming part of the local board.
- Documents relating to existing charges on the foreign company's property.
- Notice of addresses of the foreign company in its place of origin or its principal place of business.
- Notice of the address of its registered office in Kenya.
- Issuance of Certificate of Compliance.
Upon approval of the registration application by the Registrar, the foreign company will be issued a certificate of compliance. This certificate contains a unique identifying number and includes details such as the date of registration, the date of incorporation in its place of origin and is executed and sealed by the registrar. The certificate of compliance serves as conclusive evidence of the foreign company's registration in Kenya.
Corporate Name and Local Representative
Foreign companies have the option to maintain their name under the law of their country of incorporation or select an alternative name for operations in Kenya. The chosen name will serve as the corporate name of the company within the Kenyan jurisdiction.
Moreover, it's imperative for a foreign company to appoint at least one local representative before registration. These representatives play a crucial role in ensuring compliance with the Companies Act and serve as liaisons between the company and various stakeholders in Kenya. Although not required to own shares in the company, local representatives may be held personally liable for non-compliance under the Act.
In Conclusion, adhering to the requirements above is paramount for smooth operations in maximizing available opportunities in the Kenyan market. By understanding and navigating the registration process effectively, foreign investors can establish a strong foothold in Kenya and contribute to its vibrant economic landscape and, therefore, whether you're a seasoned investor or exploring new horizons, Kenya's thriving business environment welcomes you. Take the necessary steps to register your foreign company today and unlock the boundless potential that this East African gem has to offer.
About the Author
FCS Catherine Musakali is an Advocate of the High Court of Kenya, and a Fellow of both the Institute of Certified Public Secretaries of Kenya and the Institute of Directors, Kenya. Catherine is a founding partner of Dorion Associates LLP, a firm specializing in governance and commercial legal transactions.
