Introduction

This is a follow-up to our alert dated 9 March 2020 on the enactment of section 93A of the Companies Act No.17 of 2015 (the Companies Act) and the Companies Act (Beneficial Ownership Information) Regulations 2020 (the Regulations) (together, the Disclosure of Beneficial Ownership Legislation). The previous alert is available here.

The Companies Act was amended on 23 July 2019 to introduce section 93A which requires every company to keep a register of its beneficial owners containing certain information relating to such owners as prescribed by regulations made under the Act.

The Regulations prescribe how companies (and their officers) are required to comply with their obligations under the Disclosure of Beneficial Ownership Legislation.

By a notice dated 13 October 2020, the Companies Registry (the Registry) has set 31 January 2021 as the deadline within which companies are required to have prepared and filed their registers of beneficial owners with the Registrar of Companies (the Registrar).

Meaning of “beneficial owner”

The Regulations define a “beneficial owner” as:

• a natural person who ultimately owns or controls a legal person or arrangement; or
• a natural person on whose behalf a transaction is conducted, and includes those persons who exercise ultimate effective control over a legal person or arrangement.

The phrase “ultimately owns or controls” is, in turn, defined to mean “a situation where ownership is exercised through a chain of ownership or by means of control other than direct control”.

Expounding on the above definitions, the Regulations provide that a beneficial owner of a company is a natural person who meets any of the following criteria in relation to the company:

• 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.

The phrase “significant influence or control” is defined to mean “participation in the finances and financial policies of a company without necessarily having full control over them”.

Compliance requirements under the Disclosure of Beneficial Ownership Legislation

The Disclosure of Beneficial Ownership Legislation requires a company to, among other things:

• keep a register of its beneficial owners (The Register of Beneficial Owners);
• take reasonable steps to identify its beneficial owners;
• notify a person it knows or suspects to be a beneficial owner of the company, to provide the prescribed particulars required of a beneficial owner;
• enter the prescribed particulars of its beneficial owners in its Register of Beneficial Owners;
• file with the Registrar, a copy of the company’s Register of Beneficial Owners within 30 days of preparing such Register; and
• file with the Registrar any amendment to the Register of Beneficial Owners within 14 days of such amendment.

Penalties for non-compliance

• If a company requests a person to provide his or her prescribed particulars for inclusion in the Register of Beneficial Owners, but that person fails to do so within 21 days of the notice, the company is required to restrict such person from performing certain transactions e.g. transferring shares, exercising certain rights, subscribing for more shares or receiving dividends.
• Failure to comply with the requirements under the Disclosure of Beneficial Ownership Legislation is an offence in respect of which the company, and any of its officers who is in default, is each liable to a fine of up to KES 500,000 (about US$5,000).
• If, after a company or any of its officers is convicted of the abovementioned offence, the company continues to fail to comply with the relevant requirement, the company, and each officer of the company who is in default, commit a further offence on each day on which the failure continues. The company and each such officer is each liable to a fine not exceeding KES 50,000 (about US$500) for each such continuing offence.

Filing requirements

Filings at the Registry are made through an electronic system known as the Business Registration Services Portal (the BRS Portal) that was adopted by the Registry about three years ago.

The Registry has now put in place administrative arrangements to facilitate the implementation of the Disclosure of Beneficial Ownership Legislation.

The BRS Portal now has a new category for providing beneficial ownership information during the incorporation of a company. In effect, information regarding beneficial ownership must now be provided at the point of incorporation of a company.

Further, existing companies are required to prepare and file their Registers of Beneficial Owners with the Registrar by 31 January 2021.

In addition, it is important to note that, going forward, the Companies Registry will not allow a company to make any filing at the Registry without the company first filing its Register of Beneficial Owners.

Next steps

Every company should:

• liaise with its company secretary or its legal advisers to ensure that it prepares its Register of Beneficial Owners;
• request the prescribed particulars from its shareholders to be included in its Register of Beneficial Owners;
• prepare and file its Register of Beneficial Owners with the Registrar of Companies by 31 January 2021; and
• take the required restrictive measures under the Disclosure of Beneficial Ownership Legislation against any person who, despite having been requested to do so, fails to provide to the company the prescribed particulars for inclusion in its Register of Beneficial Owners.