Executive summary

The Registrar of Companies under the Business Registration Service (BRS) of Kenya has issued Directive No. 01 of 2024, which mandates companies and limited liability partnerships (LLPs) to comply with beneficial ownership disclosure requirements as required under the Companies Act, 2015.

This directive is pursuant to a provision in the Companies Act and Limited Liability Partnership Act that requires corporations and LLPs to maintain a register of beneficial ownership and disclose beneficial ownership information. Although beneficial ownership disclosure requirements are already part of Kenya's regulatory framework, this directive serves as a reminder of the existing requirements and emphasizes the obligations to which companies and LLPs must adhere. This initiative is part of Kenya's efforts to combat money laundering, terrorism financing and proliferation financing.

According to Section 93A of the Companies Act and Section 31B of the Limited Liability Partnership Act, all companies and LLPs are required to submit beneficial ownership information. A beneficial owner is defined in the Companies Act, 2015 as "the 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 ultimate effective control over a legal person or arrangement."

The Companies (Beneficial Ownership Information) Regulations, 2020 recognize beneficial ownership of shares and thereby supplement the definition of a "Beneficial Owner" by providing that a beneficial owner shall be a natural person who satisfies the following criteria:

1. Holds at least 10% of the issued shares in the company either directly or indirectly
2. Exercises at least 10% of the voting rights in the company either directly or indirectly
3. Holds a right, directly or indirectly, to appoint or remove a director of the company
4. Exercises significant influence or control, directly or indirectly, over the company

The compliance deadline has been set as 30 November 2024 for private limited companies, while the deadline for LLPs will be communicated later.

Failure to comply with these requirements will result in a penalty of 500,000 Kenyan shillings (Kes. 500,000) in addition to a daily fine of Kes. 50,000 until the breach ceases. Additionally, a Kes. 2,000 administrative fee and a Kes. 200 daily fine will be imposed for not reporting amendments within 14 days. Noncompliance could lead to deregistration from the official register, as indicated in Section 894 of the Companies Act and 33A of the Limited Liability Partnerships Act.

Companies are required to file any amendments to the beneficial ownership register within 14 days of such changes occurring. Failure to comply will attract an administrative fine of Kes 2,000 for the company and each officer in default, with an additional penalty of Kes 100 for every day the offense continues, applicable to both the company and the responsible officers.

Conclusion

It is imperative for companies and LLPs to maintain up-to-date registers of beneficial owners. Failure to comply with these requirements carries substantial penalties, including fines and the possibility of being struck off the beneficial ownership register.

Companies and LLPs are also required to report any amendments to their beneficial ownership register within the specified 14-day timeframe to avoid additional fines.

It is crucial for businesses to take immediate action to align with the new regulatory requirements.