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Beneficial Ownership Newsletter

By: IT Support January 14, 2021 no comments

Beneficial Ownership Newsletter

Legal Newsletter

DISCLOSURE REQUIREMENT FOR

COMPANY BENEFICIAL OWNERSHIP IN KENYA

Introduction

In 2019, the Statute Law (Miscellaneous Amendments) Act, No. 12 of 2019 made amendments to Section 93 of the Companies Act, No.17 of 2015 by inserting section 93A and making provision for beneficial ownership in a Company. To give effect to section 93A the Attorney General gazetted the Companies (Beneficial Ownership Information) Regulations, 2020 on 28th February 2020.

Accordingly, on 13th October, 2020 the Registrar of Companies operationalized the beneficial ownership e-register, requiring companies to update their beneficial ownership e-register on or before 31st January 2021. The provision of the Act and the regulations makes it mandatory for all private companies other than those publicly listed in the Nairobi Securities Exchange to maintain a register of their beneficial owners.

The officers of the company are required to ensure compliance with the provisions of the Act and the regulations.

Who is a Beneficial Owner of a company?

The Company (Beneficial Ownership Information) Regulations, 2020 provides that a natural person is deemed to be the beneficial owner of a company if: –

• He/she ultimately owns or controls a legal person, arrangements or the natural person

The exercise of ultimate ownership relates to situations where the ownership of the company is exercised through a chain of ownership. i.e. a holding company which holds controlling shares in another company or a natural person on whose behalf a transaction is conducted, this may be through a trust arrangement through the company.

The exercise of ultimate control of a company may be through holding a significant number of shares in a company, exercising the right to vote in a company, having the power or right to appoint or remove any member of the board of directors of the company or controlling the majority vote.

• And persons who exercise ultimate effective control over a legal person or arrangement of a company.

The exercise of ultimate effective control relates to significant influence or control through participation in the finances and financial policies of a company without necessarily having full control over them. Creditors, for instance, may exercise control of a company if they have been given the right to block or approve certain significant financial decisions of the company.

Which Persons qualify as Beneficial Owners of a Company?

In a company limited by shares, the following groups of persons qualify as having beneficial ownership in the company: –

1. The persons who directly/indirectly hold at least ten percent (10%) of the issued shares in the company.

2. The persons who exercise at least ten percent (10%) of the voting rights in the company either directly or indirectly i.e. through voting proxy agreements.

3. The persons who hold a right, directly or indirectly, to appoint or remove a director or majority of the Board of Directors of the company.

Please note that in a scenario where a holding company directly owns or controls over 10% of the shares in another company, the shareholders of the holding company who are natural persons shall be deemed to be beneficial owners of the other company. Indirect ownership of shares in a company on the other hand may be through trust arrangements or shareholder’s agreements that confer one with ownership of shares in the company.

What is the Obligation of the Companies to ensure the Compliance with the Regulation?

Every private company have an obligation to take reasonable steps to identify its beneficial owners, investigate and obtain the particulars of a person where there is reasonable cause to believe that a person is a beneficial owner of a company and enter the details of the beneficial owner in its register of members.

Every company is required to submit its register of Beneficial owners through Form BOF-1 (attached below) on or before 31st January 2021.

What is the Penalty for Non-compliance?

The Companies Act provides that if a company and/or each officer of the company that fails to comply with this requirement, shall be liable to a fine not exceeding Kshs 500,000/=. If the offence subsists after conviction, the company and each officer are liable to a fine not exceeding Kshs 50,000/= for each day of non-compliance.

What information is required from the Companies?

The particulars of the Company’s beneficial owners to be included in the register include: –

• The Beneficial owner’s particulars- the full name, national identity card number/ passport number, personal identification number, KRA Pin Number nationality, date of birth, residential address, postal address, current email address, current telephone number and the occupation;

• The link of beneficial owner with the company;

• The nature of ownership or control;

• The date on which any person became and/or ceased to be a beneficial owner and;

• Any other relevant detail that the Registrar of Companies may from time to time require.

Conclusion

It is important that all Companies comply with the set out regulations in order to promote transparency, ensure legal compliance and avoid criminal sanctions for non-compliance.

KARANJA-NJENGA ADVOCATES

info@knjenga.co.ke

FORM BOF-1

REGISTER OF BENEFICIAL OWNERS

[Section 93A of the Companies Act, 2015]

Name of the company: ______________________
Number of the company: ______________________

To the Registrar of Companies

The above company hereby gives a notice in accordance with section 93 of the Companies Act, 2015 that the following person(s) is/are beneficial owner(s) of the company

# 1 Date that the person(s) became a beneficial owner: -………………………..
Full Name

National identity card number/
Passport number

Personal Identification Number

Nationality

Date Of Birth

Residential address

Postal Address

Current Email Address

Current Telephone Number

Occupation

Link of beneficial owner with the
company

The percentage of shares a person holds in the company
Directly: %
Indirectly: %
The percentage of voting rights a person holds in the company
Directly: %
Nature of ownership or control the Indirectly: %
beneficial owner has in the company
A person holds a right to appoint or remove a majority of the
board of directors of the company; and/or
Directly: YES/NO
Indirectly: YES/NO
Whether a person exercises significant influence or control over
the company.
Directly: YES/NO
Indirectly: YES/NO
Source of B.O information ………………………………………

# 2 Date that the person(s) became a beneficial owner: ……………………………

Full Name

National identity card number/ Passport
number

Personal Identification Number

Nationality

Date Of Birth

Residential address

Postal Address

Current Email Address

Current Telephone Number

Occupation

Link of beneficial owner with the company

The percentage of shares a person holds in the company
Directly: %

Indirectly: %

The percentage of voting rights a person holds in the company

Directly: %

Nature of ownership or control theIndirectly: % beneficial owner has in the company

A person holds a right to appoint or remove a majority of the board of directors of the company; and/or Directly: YES/NO

Indirectly: YES/NO

Whether a person exercises significant influence or control over the company. Directly: YES/NO Indirectly: YES/NO

Source of B.O information

Lodged on behalf of the company by:

Name

ID/Passport

Number:

Address

Signature ………………………………………………………..

Capacity

Date:

NOTES
This form is used to notify the Registry of the particulars of company beneficial owners.

** Please indicate the position in accordance with regulation 13.

*** Please give a description and attach evidence of the steps taken to acquire the particulars.

**** Please indicate whether director, certified secretary or advocate of the company

***** Please indicate whether the information obtained was (a) provided by the beneficial owner or their authorised representative; (b) taken from an official register; or (c) provided by a third party not directly related to the beneficial owner.

*****

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