On 5th July 2019 the President of the Republic of Kenya assented to the Statute Law (Miscellaneous Amendments) Act, No. 12 of 2019 (the “Miscellaneous Amendments Act”) whose date of commencement was 23rd July 2019. Among the major amendments contained in the Miscellaneous Amendments Act are amendments to Sections 93 and 611 of the Companies Act, 2015 (No.17 of 2015) (the “Companies Act”).
Section 93(1) of the Companies Act has been amended by deletion of the expression “which shall include information relating to beneficial owners of the company, if any”. In addition the expression “including information relating to beneficial owners, if any” contained in section 93(8) of the Companies Act has been deleted. Section 93 A has been inserted immediately after section 93.
Section 93A makes it mandatory for companies to keep a register of beneficial owners with the relevant information relating to the said beneficial owners as will be prescribed by the Companies (Beneficial Ownership Information) Regulations, 2019 (the “Regulations”) that are yet to be gazetted. Further, companies are now required to lodge a copy of the register with the Registrar within 30 days after the preparation of the same. Any amendments to the register shall be lodged with the Registrar within fourteen (14) days save for public listed companies. If a company fails to comply with this requirement, the company, and each officer of the company who is in default, commit an offence and on conviction each liable to a fine not exceeding Kenya Shillings five hundred thousand (KES 500,000/-). If following conviction the company continues to fail to comply, the company and each of its officers in default commits a further offence on each day of which the failure continues and on conviction are liable to a fine not exceeding Kenya Shillings fifty thousand (KES 50,000/-) for each such offence. The rationale of this amendment is to strengthen the government’s resolve in combating money laundering by requiring companies to reveal personal details of individuals holding at least ten percent (10%) stake or voting rights in the company. On the other hand, this amendment has the potential of undermining confidentiality in the business sphere and discouraging foreign investors who value their privacy from investing in local companies.
The amendments to Sections 611(2), 611(4), 615 (3), (4) and (5) of the Companies Act have fundamentally changed the statutory threshold for takeover bids under the Companies Act. the amendments have deleted the ninety percent (90%) threshold and replaced it with fifty percent (50%) threshold. Hence, in case of a takeover offer, the statutory right will now accrue in cases where (a) the offeror has already acquired (or has unconditionally contracted to acquire) not less than fifty percent (50%) in the value of share to which the offer relates; and (b) if the shares to which the offer relates are voting shares, the offeror has acquired (or has unconditionally contracted to acquire) not less than fifty percent (50%) of the voting rights conferred by those shares. Once the offeror gives a notice pursuant to section 611, the offeror is bound to acquire the shares to which the notice relates on the terms specified in the offer. These amendments will significantly diluted the rights of minority shareholders. On the contrary, it provides ease of doing business in Kenya as it allows any shareholder holding at least fifty percent (50%) to buy out the other shareholders.
This alert is for informational purposes only. If you have any queries or need clarifications, please do not hesitate to contact Jacob Ochieng (Partner), Sheila Nyakundi (Associate) or your usual contact at our firm, for advice relating to the amendments and how the same will affect you.