The Companies (Beneficial Ownership Information) Regulations

Introduction

On the 21^st February 2020, the Companies (Beneficial Ownership Information) Regulations (the Regulations) were published vide Legal Notice No. 12 of 2020 in the Kenya Gazette in accordance with section 93 A of the Companies Act, 2015 (the Act). The Regulations provide that every company shall keep a register of its beneficial owners. Similar regulations were enacted in the United Kingdom (UK) in 2016 leading up to the launch of a register known as the People with Significant Control (PSC) register. In the UK, the purpose of enacting such regulations were to aid in tackling crimes such as tax evasion, corruption, money laundering and preventing people from hiding assets and income that are ill-gotten or on which they owe tax.

Enforcement

The Business Registration Services (BRS) through a notice published on 13^th October 2020 (the Notice) declared that the Registrar of Companies’ Beneficial Ownership (BO) E-Register has been operationalized with effect from 13^th October 2020. It further stated that every company is required to comply with the Regulations and submit a copy of the BO Register within 30 days of its preparation. A further notice was published on 30^th October 2020 granting a grace period up to 31^st January 2021 for the submission of a copy of the BO Register.

Application

The Regulations define a beneficial owner to mean a natural person who ultimately owns or controls a legal person or arrangements or the natural person on whose behalf a transaction is conducted and includes those persons who exercise effective control over a legal person or arrangement. An arrangement as defined in the Regulations refers to an artificial entity, without legal personality, associating one or more natural or legal persons together in an ownership or control relationship (such as in a nominee-trustee relationship) but without implying that the parties to this arrangement have any other form of collective identity.

The Regulations are especially important where a trust or a similar arrangement is created between a principal and a nominee over shares of a company since the details of the principal are now required, statutorily, to be submitted to the Registrar of Companies (the Registrar).

Qualification

Regulation 3 (2) further states that for the purposes of the Regulations, a beneficial owner of a company shall be a natural person who meets any of the following conditions in relation to the company:

• holds at least ten per-cent (10%) of the issued shares in the company either directly or indirectly;
• exercises at least ten per-cent (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.

Unlike in the UK where the People with Significant Control (PSC) register’s threshold for beneficial ownership is twenty five per-cent (25%), in Kenya, a lower threshold has been established and the Regulations only apply to a natural person who holds at least ten per-cent (10%) of the issued shares in a company.

BO Information Required

Regulation 3 (3) requires that the following particulars be registered with respect to a company’s beneficial owner:

• full name;
• birth certificate number, national identity card number or passport number;
• personal identification number;
• nationality;
• date of birth;
• postal address;
• business address;
• residential address;
• telephone number;
• email address;
• occupation or profession;
• nature of ownership or control;
• the date on which any person became a beneficial owner of the company;
• the date on which any person ceased to be a beneficial owner; and
• any other relevant detail the Registrar may from time to time require.

Penalties

Under section 93 A (5) of the Act, where a company fails to keep a register of its beneficial owners, each officer of the company who is in default, commits an offence and on conviction shall be liable to a fine not exceeding Kenya Shillings five hundred thousand shillings (KES. 500,000.00). Section 93 A (6) further states that, after a company or any of its officers is convicted of an offence, where 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 and on conviction are each liable to a fine not exceeding fifty thousand shillings (KES. 50,000.00) for each such offence. The penalties continue to accrue until the requirements are complied with.

Data protection

The Regulations, in line with the principles of data protection, further state that it is an offence to disclose beneficial ownership information in any manner other than for the purpose for which the information has been obtained. The penalty for this disclosure is a fine not exceeding twenty thousand shillings (KES. 20,000.00) or imprisonment for a period not exceeding six months, or to both.

The Regulations provide that the Registrar may use the information relating to a beneficial owner for communicating with the beneficial owner and that the BO information shall not be made available to the public. The only exception to this restriction is that the BO information may be made available to a competent authority upon a written request to the Registrar.

This alert has been prepared by Bernard Musyoka. Should you require any assistance in compliance or have any queries regarding the Companies (Beneficial Ownership Information) Regulations, please do not hesitate to contact Bernard Musyoka at bmusyoka@mwc.legal. Please note that this e-alert is meant for general information only and should not be relied upon without seeking specific subject matter legal advice.