The Companies (Beneficial Ownership Information) Regulations, 2020

Introduction 

Through a Legal Notice dated 18th February, 2020, the Attorney General has published the Companies (Beneficial Ownership Information) Regulations, 2020 (the “Regulations”). The Regulations seek to operationalize the provisions of the Companies Act on keeping of records regarding a company’s beneficial ownership. The enactment of the Regulations is geared towards aligning Kenya’s laws with international standards which recommend minimum levels of transparency concerning the beneficial owners of companies, trusts and other legal arrangements in order to combat among other vices, money laundering and terrorism financing. 

As Kenya is not immune to these vices, the country first introduced a law requiring companies to keep a register of beneficial owners in 2017. The regulations contemplated under the said law are what forms the subject of this article, which highlights the salient provisions by answering a few questions.

Who is A beneficial owner?

The Regulations define a beneficial owner to be a natural person who either directly or indirectly, holds at least 10% of the issued shares in the company, exercises at least 10% of the voting rights in the company,  holds a right to appoint or remove a director of the company or exercises significant influence or control over the company. 

Is the Company required to keep the beneficial owner’s details in the Register of Members?

Yes. The Regulations provide that a company shall, where applicable, enter in its register of members details in respect of its beneficial owner. These details include the full name, national identity card number/passport number, KRA PIN, nationality, date of birth, postal, residential, telephone and email address, occupation, date on which any person became a beneficial owner, date on which any person ceased to be a beneficial owner  and the nature of ownership or control. The register of beneficial owners’ particulars is required to be lodged with the companies’ registry. The Regulations also require companies to notify the registry of changes in the particulars of the beneficial owner or of the cessation of the person from beneficial ownership. 

Who is Responsible for finding out the Beneficial Owners’ details?

The company has a duty to take reasonable steps to find out and identify its beneficial owners.  Where the necessary particulars are not within the company’s knowledge, the company is required to give notice to anyone whom it knows or has reasonable cause to believe to be a beneficial owner. The notice will require the addressee to state whether or not they are beneficial owners of the company and if so, to confirm or correct any particulars of the addressee that are included in the notice. 

What if the Suspected Beneficial Owner fails to comply with the Notice?  

The addressee is required to comply with the notice within 21 days from the date of the notice failing which the company may issue a warning notice informing that person that it is proposing to issue the person with a restriction notice with respect to any interest they hold in the company. A copy of the warning notice is also to be kept in its register of beneficial owners. Upon the lapse of 14 days from the warning notice, the company may note a restriction with respect to the particular interest, lodge a copy of the restriction with the companies’ registry and notify that person of the noting of the restriction. Under the Regulations, a restriction notice renders void any transfer of the interest in respect of which the notices were given. It also has the effect of stopping the exercise of any rights in respect of the particular interest. The company may withdraw the restriction once the person complies with a request for information. 

Are there restrictions on sharing of the Disclosed Information? 

The company is barred from disclosing the beneficial owner’s particulars except when communicating with the beneficial owner concerned or when complying with any requirement of the Regulations or with a court order.  In a rather controversial provision, the Registrar may, upon a written request, disclose information to a competent authority which includes the A.G, DCI, law enforcement agencies and authorities that supervise and monitor the financial sector. The Regulations outlaw the disclosure of beneficial ownership information the in any manner other than for the purpose for which such information is obtained. 

These regulations are aimed at requiring companies to obtain and hold adequate, accurate and current information on their beneficial ownership. It is also noteworthy that provisions allowing a search to be carried out on the beneficial ownership of the company were dropped in the final draft. It is hoped that with the near blanket access given to the authorities to access beneficial owners’ information, the Regulations will help the government in its stated aim of fighting money laundering and tax evasion. A future article will explore the mechanics of compliance with the Regulations.

By Enock Mulongo

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