Understanding Beneficial Ownership and Disclosure in Kenya

In Kenya, transparency in business ownership is not just a regulatory requirement, it is a pillar of good corporate governance. The concept of beneficial ownership has continued to gain prominence as part of Kenya's commitment to combat money laundering, terrorism financing, and corruption. As a business operating in Kenya, understanding and complying with beneficial ownership disclosure requirements is essential.

What Is Beneficial Ownership?

A beneficial owner is the natural person who owns or controls a company. This can be through direct or indirect ownership of at least 10% of the company's shares or voting rights, the ability to appoint or remove a majority of the board of directors, or exercising significant influence or control over the company.

A beneficial owner differs from a legal owner in that the legal owner is the person or entity whose name appears on the company’s share register, while the beneficial owner is the individual who ultimately controls or benefits from the ownership, even if not listed officially. Think of the legal owner as the person "on paper," while the beneficial owner is the person "behind the scenes", calling the shots or enjoying the profits.

Legal Framework for Disclosure

Kenya's legal framework for beneficial ownership disclosure is anchored in the Companies Act, 2015, the Companies (Beneficial Ownership Information) Regulations, 2020, and the Limited Liability Partnerships Act, 2011. The Business Registration Service (BRS) Kenya provides detailed guidelines to ensure compliance with these regulations.

Key Requirements

1. Identification of Beneficial Owners: Companies must identify individuals who directly or indirectly hold at least 10% of the company's shares or voting rights, have the right to appoint or remove a majority of the board of directors, or exercise significant influence or control over the company.

2. Maintaining a Beneficial Ownership Register: Companies are required to maintain a register of beneficial owners at their registered office. This register should include details such as full name, nationality, date of birth, address, and nature of ownership or control of each beneficial owner.

3. Filing with the Registrar: A copy of the beneficial ownership register must be filed with the Registrar of Companies through the BRS Kenya e-Register within 30 days of the register’s preparation.

4. Updating the Register: Any changes to the beneficial ownership information must be reported to the Registrar within 14 days. Failure to do so may result in penalties.

 Penalties for Non-Compliance

Non-compliance with the beneficial ownership disclosure requirements can lead to significant penalties:

1. Failure to File: A fine of KES 500,000 for the company and each officer in default.

2. Continuing Default: An additional fine of KES 50,000 for each day the offense continues.

3. Failure to Update: A fine of KES 2,000 for the company and each officer in default, with an additional penalty of KES 100 for every day the offence continues.

4. Persistent non-compliance may result in the company being struck off the register of companies, effectively ceasing its legal existence.

5. Unlawful disclosure of beneficial ownership information. Using or sharing it for purposes not allowed under the law is a criminal offence. Upon conviction, the offender may be fined up to KES 20,000, face imprisonment for up to six months, or both.

Confidentiality of Beneficial Ownership Information

While companies are required to disclose beneficial ownership information, this data is not publicly accessible. It is only available to competent authorities and regulators as prescribed by law. This ensures a balance between transparency and the protection of personal data.

How Azali CPS Can Assist

At Azali Certified Public Secretaries LLP, we offer expert company secretarial services designed to help businesses confidently manage the complexities of beneficial ownership disclosure. Our tailored support includes:

·         Conducting beneficial ownership assessments.

·         Preparing and maintaining beneficial ownership registers.

·         Filing beneficial ownership information with the Registrar.

·         Providing ongoing compliance support and updates on regulatory changes.

Final Thoughts

Complying with beneficial ownership disclosure requirements is not just about avoiding penalties, it's about fostering a transparent and accountable business environment. By understanding and adhering to these regulations, businesses can build trust with stakeholders, enhance their reputation, and contribute to the fight against financial crimes.

For more information or assistance, contact us today.