Enterprise Law Invoice (Modification) 2020 To Enhance Enterprise In Kenya – Company / Industrial Law


Business Laws Bill (Amendment) 2020 to improve Kenya’s business operations

September 24, 2020

Anjarwalla & Khanna

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With the introduction of the Economic Laws Act (Amendment) of 2019 (the Act), businesses will make a big profit if the Kenyan government amends certain laws to simplify the way business is done in the country. The bill, which was introduced in the National Assembly in November 2019 and is currently in first reading, proposes several changes that, if adopted, could reduce the cost and time required for certain transactions in Kenya.

We have put together a comprehensive review of the proposed legislative changes and their impact on the cost of doing business in Kenya.

a) Companies Act, 2015

The bill proposes to amend the Companies Act 2015 as follows:

  1. Eliminated the requirement to affix a company seal when executing company documents, contracts and deeds. A document, contract or deed is deemed to have been validly executed by a company if it has been signed on behalf of the company by two authorized signatories or by a director of the company in the presence of a witness who confirms the signature. This is a welcome change that reflects modern practice in developed jurisdictions.
  2. Abolition of the use of bearer shares. Bearer shares are unregistered shares owned by the owner of the physical share documents. Their global use has shrunk because they are more costly and a suitable tool to secure funding for terrorism and other criminal activities. The Companies Act 2015 prohibits the issuance of bearer shares. However, bearer shares issued under the previous law would be converted into registered shares within 9 months of the law coming into force if the bill was approved.
  3. Raising the applicable threshold for “squeezing” and “selling out” company shares to at least 90 percent of the company’s shares. The Companies Act of 2015 was changed in 2019 to lower the threshold from 90 percent to 50 percent. This was a severe blow to the protection of the rights of minority shareholders. This is a welcome change as it aims to protect the rights of minority shareholders from majority shareholders who may want to forcibly acquire minority shareholders’ shares.

b) The Land Register Act of 2012

The draft law proposes to amend the Land Register Act as follows:

  1. To abolish the requirement to submit a land lease release certificate and a land registry eviction certificate to the land registry, an instrument for land transfer can be registered. If the bill is passed, the buyer must ensure that the seller of the property has paid all the land records and land rents for the property as the land clerk does not require proof of payment of the land and land in order to make a transfer in relation to a property to register.
  2. Eliminated the requirement to obtain consent that may be required by the national or district government in relation to rental properties. This goes a long way in reducing the time, cost, and expense involved in obtaining consents from national or district governments.
  3. Providing the use of electronic signatures in the execution of documents processed in accordance with the Land Register Act and authority of the registrar to keep the Main Land Register in Nairobi and the Coastal Register in Mombasa in both physical and electronic form.

c) The Insolvency Act, 2015

The bill proposes to amend the Bankruptcy Act as follows:

  1. Reinforce the protection of creditors by giving them the right to request information from an insolvency practitioner about a company that has been placed under management. The liquidator is required to provide the requested information within 5 days or any other number of days agreed between the liquidator and the obligee.
  2. Providing additional factors for a court to consider when lifting a moratorium on a managed business. The bill requires a court to consider the perishability of a movable asset and whether or not the movable asset will be used to keep the business going before the moratorium on legal proceedings is lifted.

We will closely follow how the bill moves through the various stages of legislation in the National Assembly and keep you informed of further developments.

The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.

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