On 18th March, 2020 the President assented to the Business Laws (Amendment) Act, 2020 (the Act). The Act, which came into force on its date of assent, seeks to facilitate the ease of doing business in Kenya by amending various statutes. Below is a summary of the salient changes brought about by the Act, that affect specific sectors:
CONVEYANCING AND REAL ESTATE
Electronic Execution of Documents
The Act recognises the use of advanced electronic signatures and electronic signatures as a valid mode of execution of documents in Kenya. The recognition of electronic signatures is poised to improve the ease at which land transactions are carried out, especially in transactions where the parties are not in Kenya at the time of execution.
The Stamp Duty Act has equally been amended to provide that documents can be electronically stamped, extending the scope of the initial provision which only recognized stamping by a franking machine or an adhesive stamp.
The Registration of Documents Act (the RDA) has been amended to recognise electronic filing of documents. The Registrar of Documents is empowered to establish both the Principal Registry in Nairobi and the Coast Registry in electronic form. This is intended to ease the process of applying for registration of documents under the RDA, as one may not require to physically present a document for registration at either of the two Registries.
Abolishment of Land Rate and Land Rent Clearance Certificates
Previously, a person seeking to register an interest in land was required to provide proof of payment of land rates and land rent before registration is effected. An application for registration therefore had to be accompanied with Rates and Rent Clearance Certificates where rent and rates were payable.
The Act has deleted these provisions in entirety implying that it shall no longer be mandatory to produce Land Rent and Rates Clearance Certificates when applying for registration of an interest in land. Transferees therefore have to individually carry out their own due diligence and satisfy themselves that rent and rates have been paid in order to avoid assuming these liabilities.
It is however important to note that although Section 38 and 39 have been deleted from the Land Registration Act, Sections 55 (b) and 56 (4) which require production of a Rent Clearance Certificate and Consent to Lease or Charge prior to registration remain in force. It will, therefore, be necessary to address this disparity going forward, in order to clarify the applicable completion documents in property dealings.
EMPLOYMENT AND LABOUR
Waiver of Registration of Workplaces for new businesses
New businesses with less than one hundred (100) employees can now operate without registration of a workplace for a period of one year from the date of registration of the business. This provision is set to provide small and medium sized enterprises with more time to register their workplaces.
CORPORATE AND COMMERCIAL
Increased threshold for enforcing Squeeze-Out rights in mergers and takeovers
The stake that an acquiring party should purchase before enforcing a squeeze-out has been restored to ninety per cent (90%) from the current stake of fifty per cent (50%). The increase in the squeeze-out threshold seeks to restore the protection of the rights of minority shareholders, especially in listed companies.
Abolishment of the use of common seals in execution
The use of common seals in executing contracts by companies has been abolished. The adoption of this amendment broadens the scope for holding a company accountable for contracts as such contracts may be executed by any person acting under its authority, express or implied authority.
Treatment of bearer shares
Bearers of share warrants can now convert their warrants into registered shares. This provision is poised to recognize and protect the rights of bearers acquired before the coming into force of the Companies Act, 2015.
RESTRUCTURING AND INSOLVENCY
Additional factors to consider when lifting a moratorium in insolvency matters
The Act has included additional factors to consider when the courts seek to lift a moratorium in insolvency. These include, whether the value of the secured creditor’s claim exceeds the value of the encumbered asset, whether the secured creditor is not receiving protection for the diminution in the value of the encumbered asset, whether the encumbered asset is not needed for the reorganisation or sale of the company as a going concern and whether relief is required to protect or preserve the value of the assets such as perishable goods.. The inclusion of these factors is to take into account the different business exigencies of companies under administration.
Information requests by creditors
The Act gives creditors the right to request for information from the insolvency practitioner in respect of the insolvency process. The information rights will provide more transparency in relation to the insolvency process in Kenya.
Enforcement of the Building Code
The National Construction Authority (NCA) has been authorised to promulgate and enforce the Building Code in the construction industry. Consequently, any matters concerning compliance with the Building Code shall be under the purview of the NCA. The NCA will also have power to promulgate regulations relating to and to conduct mandatory inspections of the construction sites with a view to verify and confirm whether contractors are complying with the construction regulations.
Investment deductions, exemption of supplies for bulk storage of Standard Gauge Railway raw materials and market protectionism
Companies that incur a capital expenditure of at least Kenya Shillings Five Billion (KES 5,000,000,000) on construction of bulk storage and handling facilities with a minimum capacity of one hundred thousand metric tonnes in relation to the Standard Gauge Railway (SGR), will be entitled to investment deductions equal to one hundred and fifty per cent (150%) of the capital expenditure incurred from the year of first use of the facility.
Additionally, taxable supplies procured locally or imported for the construction of bulk storage in support of the SGR operations are exempted from paying import declaration fees.
Further, a twenty five per cent (25%) tax has been imposed on imported glass bottles under the Excise Duty Act.
The adoption of these amendments is intended to boost businesses for local manufacturers and ultimately grow Kenyan brands.
This alert is for informational purposes only and should not be taken to be or construed as a legal opinion. If you have any queries or need clarifications, please do not hesitate to contact Pamella Ager (email@example.com), Nelly Gitau, Jacob Ochieng (firstname.lastname@example.org), Lena Onchwari, Naeem Hirani or your usual contact at our firm, for legal advice relating to the Business Laws (Amendment) Act, 2020 and how the same might affect your business.
8th January, 2020
Oraro & Company Advocates is pleased to announce the appointment of Naeem Hirani as a Partner in the firm effective from 7th January 2020. Naeem’s appointment further strengthens the firm’s Corporate & Commercial practice as he brings extensive experience in Mergers & Acquisitions, Private Equity, Venture Capital and Corporate Law. Naeem has advised international and domestic clients in complex cross-border transactions across sub-Saharan Africa. His commitment to excellence furthers the firm’s tradition of providing exemplary service to its clients whilst upholding the highest levels of integrity and professionalism.
Naeem joins us after founding a boutique law practice called “Hirani Law” and prior to that he served as a Senior Associate at Anjarwalla & Khanna where he worked for eight years. In 2017, Naeem spent nine months working with Cleary Gottlieb Steen & Hamilton in New York under the Africa Legal Fellowship, an initiative by the Cyrus R. Vance Centre for International Justice which aims to promote diversity and strengthen the legal profession in Africa.
Welcoming Naeem to the firm, Chacha Odera, Managing Partner, stated “the partnership is delighted to have Naeem whose breadth of knowledge and impressive track record are a great addition to our Corporate & Commercial team and an asset to our clientele.”
Naeem obtained his Bachelor of Laws (LLB) from the University of Leeds, a Post Graduate Diploma in Tax from the East Africa School of Taxation and is currently pursuing a Master of Business Administration from Queen Mary, University of London.
Naeem is also a Board member of the Fleischer Foundation, a non-profit organisation whose mission is to promote the personal development and empowerment of underprivileged children in developing countries through mentorship and education.
About Oraro & Company Advocates
Established 43 years ago by George Oraro SC (one of Kenya’s top litigators), Oraro & Company Advocates is a top-tier, full-service Kenyan law firm providing specialist legal services both locally and regionally in Arbitration, Banking & Finance, Conveyancing & Real Estate, Corporate & Commercial, Dispute Resolution, Employment & Labour, Infrastructure, Projects & PPP, Restructuring & Insolvency and Tax.
The firm’s corporate & commercial practice area continues to shine and prides itself in creative solutions to the most complex transactions entrusted to them. The team has been extensively involved in the recent consolidations and acquisitions within the banking sector in Kenya, including acting for the National Bank of Kenya Limited in relation to the take-over of 100% of the company’s shares by KCB Group PLC, advising Transnational Bank and its shareholders in the sale and purchase of 93% shares to a Nigerian multinational commercial bank, and also assisting Prime Bank Limited in obtaining regulatory approvals in connection to the acquisition of a significant minority stake in the Bank by AfricInvest and Catalyst Principal Partners.
The practice area and its lawyers are recognised by leading international legal directories such as Chambers Global and IFLR1000.
Oraro & Company Advocates is a full-service market-leading African law firm established in 1977 with a strong focus on dispute resolution and corporate & commercial law. With a dedicated team of 10 partners, 4 senior associates, 10 associates, 1 lawyer and 36 support staff, the Firm has been consistently ranked by leading legal directories such as Chambers Global, IFLR 1000 and Legal 500 as a top-tier firm in Kenya.
Oraro & Company Advocates is an affiliate member of AB & David Africa.
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