BENEFICIAL OWNERSHIP: NEED FOR DISCLOSURE OF BENEFICIAL OWNERS OF A COMPANY IN KENYA
Section 93A of the Kenyan Companies Act 2015 has introduced a new development regarding updating the Beneficial Ownership of a Company.The Companies (Beneficial Ownership Information) Regulations, 2020 which came into force on 18 February 2020 provide further critical detail in connection with the implementation of section 93A of the Kenyan Companies Act.
The regulations seek to promote transparency in the ownership of Kenyan companies and in compliance with the international standards on transparency, which includes the disclosure of information of the beneficial owner.
The Business Registration Service (BRS) published a public notice notifying all officers of companies and authorized persons that the beneficial ownership E-Register (E-Register) has been operationalized with effect from 13th October 2020.
As a result, all companies are required to submit a copy of their beneficial ownership register within thirty (30) days of its preparation onto the E-Register. This process is done online.
This notice has had an immediate impact as other activities offered by the BRS such as incorporation applications, linking of businesses, maintaining the company and routine fillings cannot advance without filling of beneficial ownership information.
So who is a beneficial owner?
A beneficial owner is defined as any natural person who ultimately owns or controls a legal person or on whose behalf transactions are made and includes those persons who exercise ultimate effective control over a legal person or arrangement.
An arrangement is defined as an artificial entity, without legal personality, associating one or more natural or legal persons together in an ownership or control relationship, but without implying that the parties to this arrangement have any other form of collective legal identity. An example of an arrangement is a trust or a contractual arrangement such as voting rights between shareholders.
The Regulations apply to a beneficial owner who, whether directly or indirectly:
i. Holds at least 10% of the issued shares in the company;
ii. Exercises at least 10% of the voting rights in the company;
iii. Holds a right to appoint or remove a director of the company; and/or
iv. Exercises significant influence or control over the company (meaning anyone who participates in the financial policies of the company without necessarily having full control of them).
Particulars of a Beneficial Owner
The particulars which a company is required to enter in its register of beneficial owners include:-
i. full name of the beneficial owner;
ii. birth certificate/ID/passport number, personal identification number (retaining copies of the same);
iii. establish nationality;
iv. the full postal and physical address, business address, residential address, telephone number, and email address;
v. occupation/profession;
vi. nature of ownership or control and the date on which any person ceased to be a beneficial owner (as applicable).
All companies incorporated in Kenya (private and non-listed public companies) are required to take reasonable steps to identify its beneficial owners and enter their details in its register of members.
The Regulations impose a duty on a company to investigate and obtain beneficial owner particulars where it has reasonable cause to believe that a person is a beneficial owner of a company. This is by giving the suspected beneficial owner a notice to provide the information listed above.
The person is then required to respond to the notice within 21 days. Where the person fails to respond to the notice, the company is required to issue and keep a copy of the warning notice in its register of beneficial owners, to restrict the relevant interest of a person where the failure to respond is within 14 days from the date of the warning notice, to note the restriction in the register and to file the same with the Registrar of Companies.
Where the company is unable to trace the beneficial owner, it is required to state that it has not been able to identify the beneficial owner and his/her particulars and that it has issued a warning notice that has not been complied with and that it has issued a restriction notice of the relevant interests.
Consequences of Non-Compliance
Where a person/company fails to comply to provide information of beneficial ownership, a restriction on such person’s relevant interest (i.e. shares held; voting rights; or the right to appoint or remove any member of the board of directors) in the company is required to be noted. The effect of a restriction issued under the Regulations is that:-
i. any transfer of the interest is void;
ii. no rights are exercisable in respect of the interest;
iii. no shares may be issued in right of the interest or in pursuance of an offer made to the interest-holder; and
iv. no payment may be made of sums due from the company in respect of the interest.
A Company shall not disclose beneficial ownership details. The general rule is that beneficial ownership information shall not be made available to the public. Disclosure is only permitted:-
• where it is for communication purposes with the beneficial owner for compliance with the Regulations;
• in compliance with a court order;
• upon the request of a competent authority such as the office of the Attorney General and an investigative agency; or
• with the written consent of the beneficial owner.
It is an offence under the Regulations to unreasonably disclose beneficial ownership details. The offence is punishable by a fine not exceeding KSh.20,000 or imprisonment for a term not exceeding 6 months.
Please contact us at info@capitaregistrars.co.ke to update your Beneficial Ownership register.
