Annual Corporate Housekeeping: A Checklist for Company Secretaries to Ensure All Compliance Documents Are Up-to-Date
Maintaining proper corporate governance and ensuring compliance with the law is not just a legal obligation—it's a fundamental part of business sustainability. The Companies Act, 2015, which governs company operations in Kenya, outlines clear requirements for company secretaries to ensure that all corporate records are in order.
Annual corporate housekeeping is a critical process that ensures your company remains in compliance, avoiding legal pitfalls and penalties that could affect business operations. Below we discuss a detailed checklist to help keep the company’s documents up-to-date.
1. Review and Update Company Registers
Register of Directors and Secretaries. Verify the accuracy of the register of directors and secretaries and update it with any changes (resignations, appointments, etc). The Companies Act requires companies to maintain this register and ensure its accuracy.
Register of Shareholders/Share Register. Ensure that the register of members (shareholders) reflects the most current information. Update it with any changes in shareholding, transfers, or issues of new shares.
Failing to maintain an up-to-date register of directors and shareholders can attract penalties under Section 144 of the Companies Act, which mandates that this information must be filed with the Registrar of Companies. Non-compliance can result in fines or even deregistration of the company.
2. Filing of Annual Returns
Annual Return Filing. The Companies Act requires companies to file their annual returns with the Registrar of Companies every year, not later than 30 days from the company’s annual general meeting (AGM).
Failure to submit the annual return within the prescribed time can attract a penalty, and failure to do so for more than 6 months may result in the company being struck off the register.
3. Annual General Meeting (AGM) Compliance
Holding the AGM. Section 280 of the Companies Act mandates that private companies hold their AGM within 15 months from the date of the last AGM, and public companies must hold theirs within 6 months after the financial year ends.
AGM Resolutions. Ensure all resolutions passed during the AGM are properly recorded and filed with the company’s official documents.
Failure to hold an AGM can lead to regulatory sanctions and result in directors being liable for fines or legal actions under Section 281 of the Companies Act.
4. Financial Statements and Auditing
Financial Statements Review. Ensure the company’s financial statements for the year are prepared under the International Financial Reporting Standards (IFRS) and Kenya’s accounting standards.
Auditor’s Report. Confirm that the company has appointed an auditor, and the financial statements are signed off by them. All companies are required to maintain audited financial statements.
Failure to file audited financial statements and appoint auditors could result in penalties, with the possibility of directors facing personal liability for non-compliance under the Companies Act. A company may also face reputational damage and difficulty accessing credit facilities.
5. Compliance with Tax Filing Requirements
Tax Returns. Ensure that the company has filed its tax returns with the Kenya Revenue Authority (KRA), including Pay As You Earn (PAYE), VAT, and corporate tax.
Tax Clearance Certificate. Ensure the company has obtained its tax clearance certificate from KRA, which is essential for conducting business and entering into contracts.
Failure to comply with KRA’s tax requirements could result in penalties, interest on unpaid taxes, and legal actions that could affect the company’s ability to operate. The KRA may also suspend or revoke the company’s tax registration.
6. Updating the Company’s Memorandum and Articles of Association
Review the Memorandum and Articles. Ensure that the company’s Memorandum and Articles of Association are up to date with any amendments made during the year. The company must file any changes to its constitution with the Registrar of Companies.
Failure to update the Memorandum and Articles of Association after amendments can lead to disputes and compliance issues in the future, especially when dealing with stakeholders or potential investors.
7. Compliance with Employment and Labor Laws
Employment Contracts. Ensure that all employee contracts are compliant with Kenya’s Employment Act and any collective bargaining agreements.
Employee Records. Verify that the company maintains accurate employee records as per the Employment Act, including leave entitlements, disciplinary records, social security and health insurance details.
Failure to comply with employment and labor laws could result in legal claims, penalties, and disputes.
8. Updating Company Licenses and Permits
Business Licenses. Ensure that all relevant licenses and permits for your industry are valid and up-to-date. This includes sector-specific licenses, local authority business permits, and industry regulatory certifications.
Operating without valid licenses can result in business closure, penalties, and legal sanctions. For example, failure to renew the business permit could result in the local government shutting down the business premises.
9. Data Protection and Privacy Compliance
Review Data Protection Policies. Ensure the company complies with the Data Protection Act, of 2019, by reviewing its data privacy and security policies. Check that appropriate consent has been obtained from employees and customers for data processing.
Non-compliance with the Data Protection Act may attract fines or penalties of up to Ksh. 5 million or 1% of annual turnover, whichever is greater. Companies could also face reputational damage and loss of trust from clients.
Conclusion
Annual corporate housekeeping is essential for the smooth operation of any company in Kenya. As a company secretary, staying on top of these requirements ensures that the company operates legally and avoids fines, penalties, or reputational harm. Regularly updating compliance documents, ensuring timely filings, and maintaining accurate records are essential components of a well-functioning corporate governance system.