The National Hospital Insurance Fund (Amendment) Bill, 2021

Posted on August 9th, 2021

Proposed Provision for Amendment Proposed Amendment Our Comments
Title The Bill proposes to amend the title to the Act by adding the establishment of the National Health Scheme to the objects of the Act. This increased functionality is aimed at ensuring that the National Health Insurance Fund (the Fund) makes significant efforts at attaining Universal Health Coverage.
S. 1 The Bill proposes to define a child as a person who has not attained the age of 18 years and includes a posthumous child, stepchild, adopted child and any child to whom the contributor stands in loco parentis that has not attained the age of eighteen (18) years.

 

This definition would exclude persons who are over the age of eighteen (18) years and are students or indentured or are not employed and are dependent on the contributor. Also excluded from the definition of child would be persons with disabilities who are wholly dependent on and living with the contributor. These persons are proposed to be defined as beneficiaries in the Act, hence making the proposed amendment in line with the Constitution and the Children’s Act.
S. 5(1) The Bill proposes to introduce empanelled healthcare providers, who would replace “declared hospitals”. The criteria for the empanelment and contracting of healthcare providers for the purposes of the Act shall be set by the Minister of Health and the National Hospital Insurance Fund Management Board (the Board). This is a change from the current system of using “declared hospitals” to venture into the use of empanelled and contracted healthcare providers. The working of this proposed system is unclear as at now, and it is expected that the regulations to be promulgated by the Minister might shed more light on this.
The functions of the Board are proposed to be expanded to include facilitating the attainment of Universal Health Coverage including communication and stakeholder engagement. This is one of the pillars of Vision 2030 as well as a part of the President’s Big 4 Agenda and is set to be achieved through the National Health Insurance Fund, therefore including it in the functions of the Board is a move towards prioritising the aim given that 2030 is not too far off.
S. 9 The Bill provides for the Chairman and other members of the Board other than the Chief Executive Officer (CEO) to have their sitting allowances or other remuneration paid out of the Fund. The amount shall be determined by the Board and other relevant government agencies. The Act currently provides for this remuneration but only with the Board deciding in consultation with the Cabinet Secretary in charge of health. It does not provide for the sources of the funds. Therefore, the proposed amendment would give clarity on this issue as well as increased accountability when it comes to making the payments.
S. 10 It is proposed to have a CEO recruited competitively by the Board and other relevant agencies, who shall be an ex-officio member of the Board with no voting rights. The CEO shall deal with the day-to-day management of the Fund and shall serve for a term of three years, with eligibility for reappointment for a further and final term of three (3) years.

The qualifications of the CEO are also indicated as follows:

  • Having a Bachelors’ degree from a university recognized in Kenya;
  • Having at least ten (10) years’ experience at a senior management level with skills in health insurance, health financing, financial management, health economics, healthcare, administration, law, or business administration; and
  • Meets the requirements of Chapter 6 of the Constitution which provides for the integrity requirements for public officers.
This proposal is clearer than the current provisions of the Act, which neither provide for the qualifications, term of service and accountability threshold in the appointment of the CEO.
S. 10A The Bill proposes the recruitment of a qualified person to serve as the Secretary to the Board. The Act currently provides for the CEO to serve as the Corporation Secretary to the Board. The functions of the Corporation Secretary shall be as follows:

  • Issue notices for Board meetings in consultation with the CEO;
  • Keep custody of records of the deliberations, decisions and resolutions of the Board;
  • Transmit decisions and resolutions of the Board to the CEO for execution, implementation and other relevant action;
  • Provide guidance to the Board on their duties and responsibilities on matters relating to governance; and
  • Perform such other duties as the Board may direct.
The Act currently does not provide for a Secretary to the Board, therefore this proposed amendment would fill that gap. Further, specifically providing for the functions of the Secretary would also give clarity to the holder of that office as to what their role would be and provide room to hold them accountable should they not fulfil it.
S. 11 This section empowers the Board to appoint officers, inspectors and servants on terms and conditions that the Board shall determine. The Bill proposes to amend this section such that the officers, inspectors, and servants will be collectively referred to as “staff”. This term would allow for the Board to recruit the employees it needs to serve the Fund as needed, without limiting their designation.
S. 12 The Bill proposes to provide for a common seal for the Board, which shall be kept in the custody of the Corporation Secretary and is not to be used except on the direction of the Board. When the common seal is affixed, the Chairperson, CEO or any other person authorised in that behalf by a Board resolution may authenticate it. The Act currently does not clarify the persons that are to authenticate the use of the common seal on behalf of the Board. This proposed amendment would address this lack of clarity. Further, there is also a measure of accountability since the only way any other person other than the Chairperson or CEO can authenticate the common seal is through a Board resolution.
S. 15

 

 

The Bill proposes to have employers whose employees are liable as contributors to the Fund to also be contributors to the Fund. Employers shall make a matching contribution equal to that made by their employee. This shall be a mandatory contribution. The Fund’s Strategic Plan for the period 2018 – 2022 emphasises increased funding, which is geared at enhancing access to healthcare and improved service delivery. This is in line with Vision 2030 and the President’s Big 4 Agenda, which includes affordable healthcare. Therefore, the Fund has come up with these proposals on how to increase its funding. Having found that voluntary contributions have not achieved this aim, the next step is to make contributions mandatory.
The Bill also proposes to have the national government liable as a contributor to the Fund on behalf of the indigent and vulnerable persons identified as such by the relevant government body. The national government’s contribution shall be a special contribution that shall be determined by the Board in consultation with the Minister. This is also proposed to be a mandatory contribution. Employers and the government would have to shoulder this burden to ensure the achievement of these goals should this proposed section be passed into law.
The Bill also proposes to provide for enhanced benefits for members who make voluntary contributions to the Fund. This is also a means of increasing contributions to the Fund as well as services available to contributors and beneficiaries.
The Bill proposes to empower the Minister to make regulations for the better carrying out of this section that it proposes to amend. The passing of regulations by the Minister would provide further details and clarity in terms of operationalizing the Act.
S. 15A The Bill proposes the mandatory registration of all persons who have attained the age of eighteen (18) years that are not beneficiaries under the Act. This proposal is geared at increasing contributions to the Fund. Currently, all Kenyans that are employed and earning at least KES. 1,000 are to be contributors to the Fund. Further, registration by persons who are self-employed is on a voluntary basis. Should this proposed amendment be passed into law, all adult Kenyans, who are not beneficiaries, regardless of whether they are employed or not, would have to be registered under the Act. The indigent and vulnerable persons shall have their contributions paid for them by the government. Enforcement is likely to be a challenge for this proposed section, especially noting that failing to register under the Act has not been proposed to be an offence.
The Bill proposes that the Minister of Health shall make regulations for the better carrying out of the above subsection. It is not clear how the Fund intends to implement this mandatory contribution requirement. Therefore, it is important to enact regulations that will clarify the operationalization of this law.
S. 16 The Bill proposes to protect employees from having to pay the matching contributions in place of their employers. This is through prohibiting employers from deducting this matching contribution from their employees’ salary or other remuneration. Further, the employer would be obliged to pay such contribution in their capacity as an employer. This proposed section is meant to ensure that only employers pay the matching contribution and not subject employees to an additional burden.
The Bill proposes to have employers make matching contributions, where unpaid, only from the time the contributor becomes their employee and not pay it if after all other statutory deductions have been made, the remainder is insufficient to pay that contribution. This therefore means that the term “matching contribution” is given a literal meaning such that if the employee does not make a contribution, then the employer will also not be obliged to make a contribution.
The Bill proposes to delete paragraphs (b) and (c) of subsection (3), which provides for an employer to obtain an NHIF card for their employee where it is lost, destroyed or the employee has not given it to the employer. Further, paragraph (c) obliges the employer to retain the card of the employee except when the employee requires it to make a claim or benefit under the Act. This is a step towards greater practicality. For example, where emergency medical treatment is needed, it would be impractical to require the employee to seek out their employer to get the NHIF card for the purposes of seeking treatment.
The Bill proposes to delete subsection (4) and substitute it with another providing that the sum deducted from the salary or other remuneration of an employee by his/her employer is not recoverable from the employer by the employee once that contribution has been remitted to the Fund. Currently, the subsection reads that the amount is not recoverable once a stamp to the value of that sum has been affixed to a card issued to that person and duly cancelled. Since the use of stamps to prove payment is no longer applicable today, the amendment of this subsection is necessary.
The Bill proposes to amend subsection (6) such that it provides for a penalty for employers for failure to pay both standard and matching contributions into the Fund and imposes a penalty of KES. 1 million upon conviction for failing to make the payment within the time and manner provided for in the Act. This is an effort to promote compliance on the part of employers for both matching and standard contributions. Increasing the penalty from KES. 50,000 to KES. 1 million is also meant to have a deterrent effect on employers.
 

S. 18

On the penalties for late payment of contributions, the Bill proposes to have them applied not only to standard but also to matching contributions. The proposed penalty shall be equal to twenty-five per cent (25%) of the contribution. Currently, the Act provides for a penalty of twenty-five per cent (25%) of the contribution when it comes to micro and small enterprises, while applying a penalty of twice the amount of the contribution to all other entities. This proposed amendment, if passed into law, will have the effect of harmonizing penalties in all classes of enterprises.
For employers, they shall be liable to pay the penalty above, as well as the costs incurred by the employee when seeking treatment from a contracted health care provider during the period when the contribution is due. This penalty is also meant to have a deterrent effect on employers who might be considering defaulting on their contributions to the Fund. Further, it is meant to ensure that employees have access to healthcare services in any case.
The Bill proposes that the mandatory contributions of contributors who are outside the country on the day their standard or mandatory contributions fall due be payable on the day of their return to the country. This amendment would provide some reprieve for contributors who are outside the country when their contributions fall due.
S. 19 The penalty for failing to make special contributions on the part of contributors who are required to make them when due is proposed to be equal to fifty per cent (50%) of the amount of contribution for each month during which the contribution remains unpaid and is recoverable as a sum due to the Fund and when recovered shall be paid into the Fund. This penalty is a reduction from the current penalty of having to pay five (5) times the amount of the contribution for each month it remains unpaid. Perhaps the Fund expects that this will encourage an increased uptake of enhanced benefits through the payment of voluntary contributions.
S. 21

 

The Bill proposes to delete and replace this section with another that provides for the mode of identification of a beneficiary considering the existing legal framework for national registration. For the purposes of payment of contributions, the Bill proposes that the Board may require a contributor to furnish the Board with information or particulars or other documents necessary for the purpose of identification. The mode of identifying contributors or beneficiaries is currently through a card, which is given to the contributor after contributing for some months. The provision seeks to find an alternative method of identifying beneficiaries.
The Bill also proposes making it an offence to knowingly make a false statement relating to liability to remit a standard or matching contribution as well as failure to furnish information or particulars or produce a document when refusing or neglecting to do so without reasonable cause. The proposed penalty on conviction is a fine not exceeding KES 1 million or imprisonment for a term not exceeding twelve (12) months, or to both. This amendment includes matching contributions. Further, a maximum fine of KES. 10,000 is imposed or imprisonment for a term not exceeding six (6) months. This penalty is intended to operate as a deterrent.
Evidence of payment of contributions shall be deemed conclusive if the person liable to pay the contribution has a record of remittance of the contributions and in the case of a standard contribution, a record of the contributor’s monthly payslip that the contribution has been deducted from his/her salary. The proposed amendment seeks to update the type of evidence of payment of contribution as it is currently a stamp, receipt, record of payment in the register of contributors to the Fund, and the contributor’s monthly pay slip.
S. 22

 

The Bill proposes to have the Board pay from the Fund, a benefit to an empanelled and contracted healthcare provider for an expense incurred by the provider for the provision of health care services to the number of beneficiaries determined by the Board. Currently, the Act provides for payments to declared hospitals for expenses incurred by any contributor, his/her named spouse, child or other dependant. This is a move from declared hospitals to empanelled and contracted healthcare providers.
The Bill proposes to delete subsection (2), which provides for the Board paying for the medical or health care expenses covering both inpatient and outpatient medical healthcare.

 

The Fund seeks to limit its expenditure and use this amendment as a means of doing so, more so because the proposed amendment leaves out the expenses that the Fund would cover.
The Bill proposes to delete subsection (3) and substitute it with another, which provides for subjecting the benefits payable from the Fund to such limits, regulations, and conditions that the Board may prescribe and in consultation with the Cabinet Secretary. The Act currently provides for the limits set to what shall be paid out of the Fund i.e. drugs, laboratory tests and diagnostic services, surgical, dental or medical procedures or equipment, physiotherapy care and doctors’ fees, food and boarding costs. Under the proposed provision, the benefits payable will be prescribed in regulations that will follow.
The Bill proposes to delete subsection (4) which provides that no claim or benefit is payable unless the contributor has been making payments and produces this evidence at the time of making the claim or seeking the benefit as well as the card. This proposal is in line with the aim of the Bill to stop using cards for identification purposes when making claims or benefits.
The Bill proposes to add a subsection (5), which provides that where a beneficiary has a private health insurance cover, the private health insurance shall be liable for payment up to the limits the beneficiary is covered and that the Fund shall pay the daily rebate for inpatient. Further, the Fund shall cover the outstanding bill where the private insurance cover’s limits have been exhausted subject to the Fund’s applicable limits. Currently, the Fund tends to be the primary insurer for most people who are co-insured members. Therefore, this move is meant to reduce the Fund’s burden as far as payments and benefits are concerned.
S. 23 The Board is proposed to avail a statement of accounts to a contributor, or a person who is liable to remit standard and matching contributions on their contributions. Currently, for one to get a receipt of payment, they are required to present their card to an officer of the Fund. This is outdated as the Fund uses electronic and mobile payment systems, hence the need to keep the Act up to speed with current norms.
 

S. 24

S. 25(2)(b) & (c)

 

S. 26(a)

The Bill proposes to repeal this section, which provides for the printing and sale of National Hospital Insurance stamps at such prices as the Board may from time to time determine.

Further, the Bill proposes to delete the paragraphs providing for offences related to the use of cards or stamps.

The Bill provides for regulations relating to the issue of any stamps or the replacement of cards under the Act.

If the Bill is passed, stamps and cards shall no longer be used as evidence of contribution; making them obsolete hence requiring the repeal of this section 24; paragraphs (b) and (c) of section 25(2) and section 26(a).
S. 25

 

 

 

 

Subsection (1) provides for offences relating to benefits under the Act i.e. making false statements for the purpose of obtaining a benefit under the Act with a penalty of a maximum of KES 500,000 or to an imprisonment term not exceeding twenty-four (24) months. The Bill proposes to increase it to KES 10 million or to an imprisonment term of sixty (60) months. Concerns have been increasing over the fraud perpetrated to access the benefits of the Fund and the payments from the Fund as well, hence the need to increase the penalties for the same. This amendment is expected to have a deterrent effect and reduce the instances of fraud.
Subsection (2) provides for the offence of impersonating any person whether living or dead with the intent to obtain the payment of any benefit. The Bill proposes to increase the imposed penalty from KES. 500,000 or to an imprisonment term not exceeding three years to KES. 10 million, with the imprisonment term remaining unchanged.
The Bill proposes to delete subsection (5) and replace it with one that obliges the Board to cause the name of every health care provider removed from the register to be notified in the Gazette and at least three newspapers with nationwide circulation. This proposal seeks to widen the publication of this removal to include at least three newspapers with nationwide circulation. It is important for beneficiaries and contributors to know which hospitals have been removed from the register so that they will not seek services from them.
The Bill proposes to add a section 5A, which provides that a health care provider removed from the register shall not be entitled to receive any benefit from the Fund. The Act currently provides for this. The proposed amendment results in a rearrangement of the sections of the Act.
S. 26(d) The Bill proposes to remove the need for the Board to make regulations on rebates for contributors who have no dependants or who fulfil such other conditions or requirements as may be prescribed in cases of voluntary contributions. The rebates would be given at the discretion of the Board, if at all, to contributors without them having to fulfil certain conditions or be part of a certain class of contributors. However, the regulations that the Board may come up with would determine if there are any conditions precedent that would have to be fulfilled to get the rebates.
S. 30

 

 

The Bill provides for the obligation of the Board to consult the relevant accredited bodies and subsequently publish in the Gazette, a list of empanelled healthcare providers for the purposes of this Act.

The Bill proposes to delete subsection (2) and replace it with another which provides that the Gazette notice above may be accompanied by conditions relating to the fees which may be charged by the healthcare provider to any contributor under the Act.

This is to replace declared hospitals and excludes the Chairperson of the Medical Practitioners and Dentists Board from the process of consultation. Further, the proposed amendment would make this a mandatory obligation. It is currently discretionary.
The Bill proposes to give the Board the discretion to revoke, at any time, an empanelment under this section. Currently, the Act provides that the Board must consult the Minister of Health before revoking any declaration under the Act i.e. declared hospitals. This proposed amendment, if passed, would give the Board greater independence and power in relation to revoking an empanelment and may assist in enhancing efficiency.
The Bill proposes to include a subsection (4) which would oblige the Board to make regulations for the better carrying out of section 30 on the empanelment of healthcare providers. As stated in the foregoing, this system of using empanelled healthcare providers is new and the regulations are necessary to enhance clarity when it comes to actual operationalization.
S. 32

 

The Bill proposes to amend this section on the inspection of declared hospitals, to replace the words “declared hospitals” with “empanelled and contracted healthcare provider”. This proposed amendment would regularise the use of terms under the Act since the Bill proposes to phase out the use of the term “declared hospitals” under the Act.
In subsection (3) on the offences of obstructing an inspection or refusing to answer questions or furnish information, the penalty upon conviction is proposed to be enhanced to KES 1 million or an imprisonment term not exceeding twenty-four (24) months. These proposed amendments seek to increase the deterrent effect of the penalties and hence increase compliance with the law.
The Bill also proposes to enhance the penalty for an inspector giving false information to a fine not exceeding KES 10 million or an imprisonment term not exceeding sixty (60) months or to both.
S. 34 The Bill proposes to increase the scope of the use of the Board’s investment funds to include the acquisition of supportive infrastructure for empanelled and contracted healthcare providers. Further, the Bill also proposes to have the Board determine the financial viability of healthcare providers that the investment funds may be applied to in the improvement of any underserved area without including the Minister of Health. This widened scope might increase the Board’s capabilities in increasing the efficiency of healthcare providers. The amendment to the proviso is meant to exclude the Minister of Health from determining underserved areas as far as healthcare providers are concerned. This would give the Board independence from the Minister of Health.
S. 41 The Bill proposes to repeal this section, which provides for the power of the Board to determine whether and when a prosecution may be undertaken for offences committed under the Act. This proposed repeal recognizes that the mandate to prosecute is vested in the Director of Public Prosecutions, and as such the Board cannot be involved in the determining whether or when prosecution shall be undertaken.
S.43 This section provides for the recovery of compensation or damages and refers to the Workmen’s Compensation Act in doing so. The Bill proposes to update this to the Work Injury Benefits Act, 2007 which is the relevant legislation. This amendment would align the Act with the Work Injury Benefits Act, which was enacted in 2007.
S. 45 This section provides for a general penalty for offences under the Act which may not have a penalty applied to them. The penalty is currently a fine not exceeding KES 50,000 or an imprisonment term not exceeding two years or to both and is proposed to be increased to KES 1 million. The Bill does not propose to increase the prison term. The proposed amendment seeks to increase the deterrent effect of the penalties and hence increase compliance with the Act.
Second Schedule The Second Schedule to the Act, which provides for the Conduct of Business and Affairs of the Board, is proposed to be amended in paragraph 4 by providing that the quorum for meetings of the Board is two-thirds of the members. Currently, the quorum is nine (9) members, with Board members being thirteen (13) in total excluding the Chief Executive Officer.

Registration of Business Names (Amendment) Bill, 2021

Posted on July 9th, 2021

Proposed Provision for Amendment Proposed Amendment Our Comments
2 a) Including the following definitions:

    • “address” has the same meaning as assigned under the Companies Act;
    • “alternate address” means an address used by a proprietor of a business that is not his primary address;
    • “board” means the Board of Directors established under section 5 of the Business Registration Service Act;
    • “Certificate” means the certificate of registration issued under section 14;
    • “proprietor” means an individual or corporation who has registered a business name;

b) Providing that a “minor” means a person who has not attained the age of 18

c) deleting the definition of the term “foreign concern”

d) deleting the definition of the term “Registrar” and substituting therefore the following new definition; “Registrar” means the Registrar appointed under the Companies Act;

e) Requiring all persons, when submitting their particulars under the Act, to also submit the particulars of their nationality, without subjecting British subjects only to this requirement.

f) deleting subsection (3), which does not require the disclosure of name changes of individuals before they attained the age of 2 years.

If passed, the proposed definitions would provide some much-needed clarity when it comes to the interpretation of these terms under the Act. As the Act commenced on 29th September 1951, it is expected that its provisions might be out of line with legal and other developments, which requires them to be updated. For example, an amendment to the meaning of the word “minor” is overdue.

An amendment to redefine the term “Registrar” is similar to the amendment proposed in the Movable Property Securities (Amendment) Bill, 2021 and is an effort to bring most matters to do with business registration and regulation in the purview of one public office.

As Kenyans no longer consider themselves British subjects, the requirement for only such persons to disclose their nationality is outdated.

 

3 The Bill proposes to have the Deputy Registrar and every Assistant Registrar appointed pursuant to section 831(3) of the Companies Act be the Deputy and Assistant Registrars of Business Names. The Registrar is obliged to keep and maintain a register in the prescribed manner, in which shall be entered the particulars required under the Act. This is an effort to streamline and centralise services related to business entities to make them effective and avoid duplication of similar roles by having one body serve this purpose.
4 a) The Bill proposes to delete all references to “firm individuals and corporations” and substitute them with “proprietors” in the section.

 

 

b) Delete the word “administrative receiver” immediately after the term “administrative”.

Replacing the words “firm individuals and corporations” with the term “proprietors|” is a means of providing clarity as this term is defined in the proposed amendment of section 2. Further, firm individuals and corporations may refer to artificial persons yet there is a shift towards identifying the natural persons who own business entities. The proposed amendment is in line with that policy.

There is no mention of “administrative receiver” in section 4.

5 The Bill proposes to delete section 5, which provides for registration by nominees i.e., that if a nominee or trustee wholly or mainly carries on business for firms, individuals or corporations with a place of business within Kenya or act as general agents of any foreign firm, the business is to be registered under the Act. The section also exempts businesses carried on by a trustee in bankruptcy or a receiver manager appointed by any court from having to register under the Act. Persons carrying out business in Kenya are required to be registered under the Act in any case, hence deleting this section would rid the Act of unnecessary sections.
6 The Bill proposes to delete and substitute section 6 with another new section setting out the particulars that proprietors under the Act are to submit when seeking to register their business. The particulars are:

    • The business name
    • Concise description of the true nature of the business
    • The address of each place where the business is to be carried on
    • The given names and the usual place of residence of each applicant who is an individual, and the corporate name and the place of incorporation office of each applicant that is a corporation
    • The full address of every other place of business
    • Alternate address of the proprietor
    • Proposed date of the commencement date of the business; and
    • Such other information concerning the Business Name as may be required by the Registrar

If the business is carried on under two or more business names, each of those business names are to be stated.

On receipt of a statement of particulars, the Registrar is to enter the firm, individual or corporation in the register subject to section 17.

The proposed particulars are clearer as compared to those currently in the Act. The particulars also indicate favouring increased disclosure for businesses. This is to ensure accountability for the actions of business proprietors. For example, the requirement for a concise description of the true nature of the business to be carried on in the business name is currently phrased as a requirement to disclose the general nature of the business under the Act.
6A The Bill proposes to clothe the Registrar with the power to require any document to be lodged or issued electronically under the Act. The Registrar may allow the document to be lodged by an agent of the person required to lodge it, subject to any conditions that the Registrar may impose from time to time.

A copy of a document lodged electronically with the Registrar purported to be certified by the Registrar as a true copy of the original document is, in the absence of evidence to the contrary, admissible in all legal proceedings as proof of the original document.

This would give legitimacy to documents lodged electronically with the Registrar, hence avoiding the need to subject them to strict proof. This is also an indication that electronic documents are increasingly being recognized as legitimate documents.
8 Deletion and substitution.

The Bill proposes to allow for the registration of a Business Name after a business has commenced and further obliges persons responsible for a business to apply to the Registrar for the registration of the business within 30 days from the date of the commencement of the business.

 

The current section 8 provides for furnishing of all statements of particulars under the Act within twenty-eight days of the business commencing. The proposed amendment, if passed, would give business proprietors an additional two days to comply with the registration requirement.

9 The Bill proposes that if a change is made or occurs in any of the particulars registered in respect of any proprietor of a business or of the business, that proprietor or the person responsible for the business shall submit to the Registrar in the prescribed form the particulars of the change within 30 days after the change occurs.

The relevant particulars may include a change in the general nature of a business; addition or removal of a proprietor; name of a business; or address of the proprietor or of the principal place of the business or any other place where the business is carried out.

The Bill also proposes to authorise the Registrar to request for particulars from individuals or their authorised agents as necessary to ascertain whether the individual should be registered under the Act or whether any alteration in the registration particulars should be made. Further, the Registrar may require any such particulars to be verified by a statutory declaration.

Once the application for the change of particulars of a business name are approved, the Registrar shall issue a certificate of change of particulars.

The amendment, if passed, would give business proprietors an additional two days to comply with the registration requirement as compliance is currently required within 28 days.

The increased disclosures are indicative of a move toward business transparency in Kenya, more so when it comes to the identity of the proprietors of a business.

There also seems to be a need to increase the veracity of particulars asserted through request of particulars or verification via a statutory declaration.

It is not clear what happens after an existing certificate of registration is cancelled. Would it mean that the certificate of change of particulars is what is to be used henceforth in place of the certificate of registration? There is need for clarification as to what happens when an existing certificate of registration is cancelled; and whether the certificate of change of particulars will take the place of the certificate of registration.

 

10 The Bill proposes to make it an offence to fail to furnish a statement of particulars for a notice of any change in particulars without reasonable excuse in the manner and within the time specified. The sanction is KES 20,000 or the Court shall order a statement of the required particulars or notice of the change in particulars to be furnished to the Registrar within such time as may be specified in the order or to both.

Where a person submits particulars that they know is false or authorizes or permits the submission to the Registrar such a statement commits an offence and on conviction is liable to a fine of KES 100,000 or to imprisonment for a term of three years, or to both.

The use of the word “for” seems to be the result of a grammatical error, since the word “or” would make better sense of the clause.

The threatened sanctions are intended to act as deterrents of non-compliance. This proposed amendment provides harsher sanctions for failure to comply compared to the current provision in the Act, which imposes a court order requiring compliance from the defaulter as may be specified in the order. Perhaps this sanction was not as effective at ensuring compliance and strenuous measures are needed.

12 Deletion and substitution.

The Bill proposes to impose penalties for signing or submitting to the Registrar a statement or particulars made or purporting to be made for the purpose of the Act, that to his knowledge is false or authorizes or permits the submission to the Registrar such a statement or particulars that to their knowledge is false. Such actions constitute offences and on conviction, an individual would be liable to a fine of KES 100,000 or imprisonment for a term of three years, or to both.

 

This would be an enhancement of the penalty for making false statements, which is currently an imprisonment for a term not exceeding twelve months or to a fine not exceeding KES 2,000 or to both. Enhancing penalties is meant to encourage more compliance through deterrence and punitive action in case of default. Should it pass, only time will tell if it would have the desired effect.

13 Deletion.

The section provides for the Registrar’s power to require an individual to furnish him or her with particulars that are necessary to decide whether a business should be registered under the Act.

 

The proposed amendment is acceptable since more comprehensive provisions on the power of the Registrar to require an individual to furnish him or her with particulars is adequately provided for in the proposed section 6A.

14 Deletion of subsection (2)

Amendment of subsection (3)

The Bill proposes to remove the requirement of the Registrar to issue a fresh certificate in the prescribed form after any change in the particulars is made.

The Act requires persons of all nationalities other than those of British nationality from indicating their nationality on the certificate issued by the Registrar upon registration under the Act. The Bill proposes to remove this exception such that the nationality of all partners and individuals will be indicated in the certificate.

The Act requires the minority of minors to be shown on the certificate the Registrar issues. The Bill proposes to remove this requirement.

 

 

The Bill proposes to have the Registrar under its proposed section 9 to issue a certificate of change of particulars and cancel the certificate issued upon registration. Therefore, the section providing that the Registrar issue a fresh certificate must be removed from the Act should it pass.

The removal of the two latter exceptions is to avoid discrimination, which is not permitted under Article 27 of the Constitution, which prohibits discrimination based on age and nationality, among others.

14A Insertion

The Bill proposes to enhance the effect of registration of a business to include the entitlement of every person whose business name has been entered in the register to adopt and use the registered business name.

Further, a certificate of registration or a certified copy of any entry in the register in respect of any business name is to be prima facie evidence of the truth of the facts stated therein. However, the admission of such evidence shall not prevent any person who is not registered as such from proving that they are nevertheless an associate of a business.

 

This proposal increases the value of registering one’s business in that it includes all persons whose business name has been registered.

Giving prima facie high probative value to certificates of registration or certified copy of entries in the register in respect of any business would be a way of avoiding a situation of having to subject them to strict proof on the first instance. This can save time in proceedings as well as give legitimacy to the documents issued by the Registrar.

 

14B

Insertion

The registration of a business name is proposed to remain in force for a period of three years, but the registration may from time to time be renewed by lodging with the Registrar, at any time within the period of one month before or after the expiry of the registration, a statement in the prescribed form signed by the person or an authorized agent and upon payment of the prescribed fee. The Registrar will only accept this from only the person in relation to whom the business was registered. If the Registrar refuses to renew any registration, the Registrar shall notify the applicant in writing of the decision.

Upon the expiry of three years from the date of registration or last renewal of a Business Name, the Business Name shall be deemed to be deregistered. The last certificate of registration and the Business Name shall be cancelled from the register.

If a person is aggrieved by a decision of the Registrar, they may appeal to a court of competent jurisdiction.

 

These consequences are geared at ensuring compliance on the part of the proprietors of a business. They also increase the regulation of business entities for the purpose of accountability.

 

15(3)

Section 15(3) of the Act provides for a period of twelve weeks within which a firm, individual or corporation must respond to the Registrar’s notice to confirm whether they are still in business. The Bill proposes to change this period to three months. This amendment does not seem to introduce any substantive change given that three months is equivalent to twelve weeks.
 

15A

Insertion

The Bill proposes a reprieve for persons whose registration has been cancelled. This is through an application to the Registrar to restore a business name that has been struck off, on the ground that the applicant was carrying on business or in operation at the time of striking off of the business name. The application is accompanied by registration documents relating to the business.

An application may be made even if the business has in consequence been dissolved. It is to be made only by a former partner of the business in such a case and not be made after the expiry of six years from the date on which the business was dissolved.

 

Given the automatic consequence of being struck off the register for failing to make the requisite statement and paying the prescribed fee set out in the proposed section 14B, a reprieve for businesses is welcome to ensure that they can be restored to the register upon compliance.

It is also interesting to note that this option is available for businesses that have since been dissolved. This makes it possible for businesses to start over without having to restart the registration process all over again.

17 Deletion and substitution

The Bill proposes to prohibit the registration of a business name if the use of the name would constitute an offence; the name consists of abbreviations or initials not authorised by or under the Act or the Registrar is, after considering the relevant criteria, of the opinion that the name is offensive or undesirable. The relevant criteria is to be as prescribed by the regulations.

 

This proposed deletion and replacement of section 17 would ensure that there is more discretion on the part of the Registrar to consider names rather than working within the five criteria provided for under the Act that may limit the Registrar’s discretion. Further, the classification of the prohibitions would also help persons who want to register business names to understand the parameters of acceptability. Regulations to elaborate on the same would be a welcome change.

17A Insertion

The approval of the Registrar is required where the name of a company to be registered under the Act suggests a connection with a state organ, a county government or any public authority prescribed by the regulations.

 

Limiting this to companies only is curious at best but generally seems to be an oversight on the part of the drafters of the Bill. If passed, it should apply to all business entities under the purview of the Act.

17B Insertion.

The Registrar may require an applicant in who proposes to use a business name that resembles that of a public body to seek the authority of a state organ or any public entity specified in the Regulations for the use of a specified name in the Regulations, who may veto the use of the name but only on reasonable grounds.

 

The aim is to prevent business entities or individuals from using names that may result in confusion between government agencies and business entities.

 

17C

Insertion

The proposed section provides that the regulations may permit or prohibit the use of certain characters, signs or symbols including accents and other diacritical marks that may be used in the name of a business name to be registered under the Act.

The regulations may specify a standard style format for the name of a business for the purpose of registration.

The regulations may also prohibit the use of specified characters, signs or symbols when appearing in specified positions at the beginning of a name.

The Registrar may not register a company by a name that consists of or includes anything not permitted in accordance with the regulations.

 

This provision gives the Registrar some discretion in deciding what names are acceptable and which are not, rather than giving mandatory compliance requirements.

17D Insertion

The Registrar may refuse to register a business if:

  • its name is the same as, has a close phonetic resemblance to, is identical to, or closely resembles that of another name reserved or registered by the Registrar or of a dissolved business entity or one that has been struck off the Register;
  • it differs from the name of another business name or other entity only by the addition of a name of a place, locality or region within Kenya;
  • it is the same as a name of a body corporate or established under a written law; or
  • the Registrar believes on reasonable grounds that its use would involve the commission of a criminal offence or that is offensive or undesirable or contrary to public interest.
 

These provide adequate guidelines for business owners seeking to register the names of their business. Further, the provision also gives the Registrar discretion in deciding such matters.

 

17E

Insertion

The Bill proposes to empower the Registrar to direct a change of a business name in writing where it has been registered by a name that is the same as or in the opinion of the Registrar, too similar to a name appearing at the time of the registration in the Registrar’s index of company names; or a name that should have appeared in the index at that time.

The Registrar is to specify the period within which the business would be required to comply with the direction. If the business does not comply with this direction, the Registrar shall cancel the entry in the register relating to such proprietor.

 

The proposed amendment would give the Registrar discretion to decide the question of the appropriateness of a business name. Further, in as far as it applies to past entries in the register, this proposed amendment, if passed would give the Registrar an opportunity to remedy such occurrences.

Presumably 17F The proposed amendment is not numbered.

If a proprietor is dissatisfied with the Registrar’s direction to change its name in case of a similarity, they may apply to the Court to quash the direction within 21 days after the date on which the direction is notified to the Company. On hearing the application, the Court may either quash or confirm the direction. If the direction is confirmed, the Court shall specify the period within which the proprietor is required to comply with the direction.

The proposed amendment should be numbered.

If passed, this would give business proprietors recourse to court in case of an unreasonable exercise of discretion on the part of the Registrar.

23 Deletion of subsections (2) and (3)

The Act requires the publication of the true names of every individual, including, in the case of a married woman, an obligation to indicate whose wife they are. Further, minors are also required to publish their minority. This publication is mandatory in all trade circulars and business letters on which the business name appears and are issued or sent by the firm, individual or corporation or to any person in legible Roman letters.

 

These discriminatory provisions are not adhered to in practice, and it is time that the Act catches up with the Constitution and consensus in the business world. A step in the right direction.

25 Deletion and substitution with a new section 25

The Bill proposes to provide for a general penalty for when an offence is committed, and a person is found guilty but there is no penalty prescribed in the Act. The proposed general penalty is a fine not exceeding KES. 100,000 or imprisonment for a term not exceeding one year, or to both.

 

The Act currently prescribes a fine not exceeding KES 1,000 and in default of payment, an imprisonment term not exceeding three months. Perhaps the drafters found this to be not enough of a deterring factor and are seeking to increase its deterrent effect.

 

26

Deletion

The Bill proposes to delete the section that provides for the jurisdiction of subordinate courts of the first and second class in trying the offences provided for under the Act.

 

The Magistrates Court Act, 2012 provides for a different classification of the Magistrates Courts as well as their jurisdiction. There is thus no need for the Act to provide for this, especially where its provisions are outdated.

Movable Property Securities (Amendment) Bill, 2021

Posted on July 9th, 2021

Proposed Provision for Amendment Proposed Amendment Our Comments
19 Insertion of subsection 2A, which states that the Registrar shall be the Registrar of Companies appointed under section 831 of the Companies Act, 2015.

Deletion of subsection 3 meaning that the Board of Service will not be the body to appoint the Registrar and the other staff of the Registry.

Since the services relating to the Act are accessed through the e-citizen platform, having all the services provided by one body would hopefully make processing of requests faster. Further, it would hopefully streamline the services to make them effective and avoid duplication of similar roles since only one body would be in charge.
23 Renumbering the existing provision as (1) and then inserting a subsection (2) immediately after it providing that the fees received by the Registrar under the Act shall be the funds of the Service i.e. The Business Registration Service under the Business Registration Service Act, 2015. Currently, the Act does not provide for what is to be done with the fees received under the Act. Making this amendment would provide a means of accountability for the funds received under the Act.

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