Legal Notice no. 12 of 2020 introduced The Companies (Beneficial Ownership Information) Regulations 2020.
To whom does it apply?
It applies to natural persons who actually controls a company or on whose behalf transactions are being transacted. This is the person who is ultimately in charge of a company even if their name does not appear anywhere in the company incorporation documents.
This means that going forward, people can no longer operate behind entities that are not linked to them, at least on paper. For example, transfer pricing regulations could possibly have been avoided. But, now having to disclose the beneficiaries of the related companies will make it impossible to do so. Employees who form companies in order to take part in their employer’s procurement opportunities will also now be blocked.
The Regulations prescribe that Kenyan companies will now have to keep a register of the beneficial owners. This will include their addresses, occupations and contact information, and the nature of control that they exercise. It shall also disclose when their ownership began, and be updated to reflect its termination.
Who then is a beneficial owner?
- A person who holds at least 10% of the issued shares in a company;
- A person who exercises at least 10% of the voting rights in the company;
- A person who holds the right to appoint or remove a director in the company; and
- A person who exercises “significant influence or control” over the company
*It is important to note that these 4 circumstances apply whether one is exercising such power directly or indirectly.
*Significant influence or control relates to the finances and financial policies of the company. If a person has a say in this, then they have significant influence or control.
Is compliance avoidable?
Companies now have a duty to investigate any person they think could be a beneficial owner, obtain their details, and furnish the Registrar of Companies with those details. If a person does not cooperate with the company, it can issue them with a warning notice for them to furnish their details.
Should they refuse, the company shall enter a restriction against that person’s interest in the company. This means that any transfer of that interest is rendered void, no rights can be exercised in respect of that interest, no shares may be issued in right of the interest or on pursuance of an offer made to the interest-holder, and no payment may be made of sus due from the company in respect of the interest.
In sum, that interest becomes static and inoperable. However, the restriction may be withdrawn upon compliance.
Where a company is unable to investigate and identify the beneficial owner, it is required to notify the Registrar of Companies of its efforts and the resultant actions it has taken e.g. court action, entry of a restriction etc.
Does this affect information privacy concerns?
It is important to note that companies can only disclose their beneficial ownership information to the beneficial owner themselves, in compliance with a court order, or in compliance with these regulations. Any other dicslosures have to be consented to by the beneficial owner in writing.
This information is not available to the public as of right.
However, any competent authority may request the information in writing from the Registrar. E.g. the Kenya Revenue Authority may request such information for tax audit purposes.
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