The Business Laws (Amendment) Act 2021

The Business Laws (Amendment) Act 2021

The Business Laws (Amendment) Act 2021

Introduction

On 30th March 2021, the Business Laws (Amendment) Act, 2021 (the Act) was assented to by the President and it came into force on the same date. This Act comes after the enactment of the Business Laws (Amendment) Act 2020. The Act amended several existing statues including: The Law of Contract Act (Cap 23), the Industrial Training Act (Cap 237), Stamp duty Act (Cap 480), the National Hospital Insurance Fund Act (Act No.9 of 1998), National Social Security Fund (Act No.45 of 2013), the Insolvency Act (Act No.18 of 2015) and Small Claims Court Act (Act No.2 of 2016) and the Companies Act, 2015 (the Companies Act). We highlight below some of the changes brought into force by the Act.

Common Seals

The Law of Contract Act has been amended by changing the definition of the term “sign” to align it with the Companies Act. The Act has amended the definition of the word sign to read, “execution of the document in accordance with section 37 of the Companies Act, for body corporates incorporated under the Companies Act.”

Section 37 of the Companies Act previously provided that a document is executed by a company either “by the affixing of its common seal (if any) and witnessed by a director; or in accordance with subsection (2).” This section was amended under the Business Laws (Amendment) Act 2020 by deleting the requirement for execution of documents by a company by affixing of the common seal.

Despite the amendment of the Companies Act in 2020, the Law of Contract Act still retained the requirement of affixing of the common seal of the body corporate. The amendment now aligns the methods of attestation between the Companies Act and the Law of Contract Act. A company’s document will now be deemed to have been validly executed if signed by two authorized signatories or by a director in the presence of witness who attests the signature. There is no requirement for such documents to be sealed.

General Meetings

The Companies Act did not previously make provision for the conducting hybrid or virtual meetings. A virtual or hybrid meeting could only be undertaken if provided for under the articles on association of a company. Section 7 of the Act now amends Section 3 of the Companies Act by adapting in the definition of general meetings physical, virtual or hybrid meetings.

The Act defines a hybrid meeting as “a company general meeting, where some participants are in the same physical location while other participants join the meeting through electronic means including video conference, audio conference, web conference or such other electronic means.

A virtual meeting in relation to a company general meeting is defined as “a meeting where all members join and participate in the meeting through electronic means including video conference, audio conference, web conference or such other electronic means.”

This amendment is especially important considering the COVID – 19 Pandemic (the Pandemic). In 2020, at the onset of the Pandemic, the Court in exercise of its powers under section 280(2) of the Act, granted authority to all companies listed in the Nairobi Securities Exchange (Public Companies) which find it impracticable to conduct its general meetings in the manner required by its articles of association on account of the Pandemic and other related public health laws, regulations, and directives to hold virtual meetings.

Another pivotal decision in 2020 regarding the convening of general meetings was filed by the Kenya Private Sector Alliance Limited (KEPSA) before Honourable Justice D. S. Majanja where the applicant in the case sought for leave to conduct virtual and /or hybrid general meetings due to the Pandemic. Leave was granted to KEPSA to hold, convene and/or otherwise conduct a general meeting using or employing the use of technology for conducting a general meeting. The same was also directed to any company which it is impracticable to conduct its general meetings in a manner required by its articles of association and the Act due to the Pandemic related restrictions.

The decisions of the Court have now been codified in statute to allow companies to leverage technology to be able to hold general meetings during the Pandemic and the period thereafter.

Notices

Section 283 and 285 of the Companies Act have now been amended to provide that where a meeting is held virtually or is a hybrid meeting, the publication of the notice of general meeting on company’s website should also specify the means of joining and participating in the meeting. The contents of notices of general meetings in the case of a hybrid or virtual meeting, should also specify the means of joining and participating in the meeting.

Conclusion

In the ever-evolving times, the above amendments are welcome as they save each company the process of amending their articles of association to provide for hybrid and virtual meetings. They also modernize the manner of execution of documents by doing away with requirement of affixing company seals in execution of documents by a company.

Other notable amendments under the Act include the following:

  • The Industrial Training Act has been amended to provide that the industrial training levy payable shall be remitted at the end of the financial year of the business but not later than the ninth day of the month following end of the financial year;
  • The National Social Security Fund Act has been amended to require an employer to pay its contribution on the on the ninth day of each month; and
  • The National Hospital Insurance Fund Act has been amended to require that a person shall pay the contribution to the Board on the ninth day of each month.

If you have any inquiries relating to the above or corporate commercial matters generally, please do not hesitate to contact Bernard Musyoka at [email protected]. Please note that this e-alert is meant for general information only and should not be relied on without seeking specific subject matter legal advice.

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