Business Laws(Amendment) (No. 2), Bill, 2020

December 18, 2020 - 5 minutes read

The Business Laws (Amendment) Bill (No.2), 2020 seeks to make various amendments to various statutes highlighted as follows: 

Clause 2 of the Bill seeks to amend the Law of Contract Act, Cap 23 to eliminate the requirement of a company seal in execution of documents for companies registered under the Companies Act, No. 17 of 2015.

Clause 3 of the Bill proposes to amend the Industrial Training Act, Cap 237 to provide for the payment of the training levy to be remitted at the end of a business’s financial year but not later than the ninth day of the month following end of the financial year.

Clause 4 of the Bill proposes to amend the Stamp Duty Act, Cap 480, to exempt payment of fixed stamp duty of one hundred shillings on contracts for purposes of reducing the cost of doing business. 

Clause 5 of the Bill proposes to amend the National Hospital Insurance Fund Act, 1998 to provide for the contributions under the Act to be collected on the ninth day of the month for purposes of harmonizing payroll deductions through the Unified Payroll Return. 

Clauses 6 and 7 of the Bill proposes to amend the National Construction Authority Act, 2011 to provide for power of the Board to inquire into defects in a building to establish the causes of the defects in terms of structural defects and latent defects and the liability on the part of a registered person. 

Clauses 8 to 12 of the Bill proposes to amend the Land Registration Act, 2012 to eliminate the use of company seals in execution of documents by companies incorporated under the Companies Act, 2015, eliminate the requirement to submit Land Rent and Rate Clearance Certificate and Consent in other land transactions.

Clause 13 of the Bill proposes to amend the National Social Security Fund Act, 2013 to provide for the contributions under the Act to be collected on the ninth day of the month for purposes of harmonizing payroll deductions through the Unified Payroll Return

Clauses 14 to 17 of the Bill seek to amend the Companies Act, 2015 (No. 17 of 2015) to eliminate the use of a company seal in operations of companies incorporated under the Companies Act. It also seeks to make amendments to facilitate companies to hold meetings either through hybrid or virtual setting.

Clauses 18 to 59 of the Bill propose to amend the Insolvency Act, 2015 to clarify that an administrator can distribute routine payment to unsecured creditors without courts permission. It also seeks to introduce a pre-insolvency moratorium period to prevent creditors from taking an enforcement action while a company considers its option for rescue.

Clause 60 of the Bill proposes to amend the Small Claim Courts Act, 2016 to make provision to fast track procedure for small claims by providing a sixty-day timeline for adjudication of small claims.

The proposed legislation is another step towards improving the ease of doing business in Kenya. This is similar to the amendments passed in March 2020 vide the Business Laws Amendment Act, 2020. The Act amended several legislations notably the Registration of Documents Act, Survey Act, Companies Act, Kenya information and Communication Act (KICA); among others. The most notable change was the provision of electronic signatures for documents which meant that that it is no longer a requirement to print document for signing. Further the law did away with the need to obtain land rent and land rates clearance certificates before dealing in land and also provided for electronic processing of survey documents. Additionally, companies would no longer be required to affix their common seal in executing documents owing to the changes in the Companies Act. This will enable directors of companies to sign contracts electronically. 

Unlike the previous amendments that focused on the digitization of documentation and transactions with Government entities, the proposals in the current legislative proposal focus on aligning and creating uniformity in remittances of statutory payments being NHIF and NSSF. Moreover, the proposed amendments also seek to ease access finances by virtue of reduced timeframe for adjudication of small claims and powers provided to an administrator in the event of insolvency to distribute routine payment to unsecured creditors without courts permission. It also seeks to introduce a pre-insolvency moratorium period to prevent creditors from taking an enforcement action while a company considers its option for rescue.

The proposal to allow for companies to hold virtual meetings is cognizance of the current reality as a result of the Covid – 19 Pandemic. 

The legislative proposals form part of Government efforts to improve the ease of doing business cognizant of the unique challenges that have been exacerbated by the Pandemic. Currently, per the Ease of Doing Business Report, 2020 Kenya improved its ranking by 5 positions to #56 with a score of 73.2 from #61 in 2019. 

Kenya’s global ranking improvement was primarily attributable to improvements in: 

  1. Dealing with Construction Permits: This was made easier by making dealings of construction permits more transparent by making building permit requirements publicly available online, and also by reducing fees 
  2. Getting Electricity: Kenya made strides to improve the reliability of electricity supply through modernizing existing infrastructure and by inaugurating a new substation in Nairobi.
  3. Getting Credit: Kenya strengthened access to credit by introducing online registration, modification and cancellation of security interests, and public online searches of its collateral registry. Kenya also set up new credit bureaus and registries which has had positive effects within the economy by reducing interest rates, collateral, and default rates for loans at commercial banks.
  4. Protecting Minority Investors: Kenya strengthened minority investor protections by requiring shareholders to approve the election and dismissal of an external auditor 
  5. Paying Taxes: Kenya made paying taxes easier by implementing an online filing and payment system for social security contributions
  6. Resolving Insolvency: Kenya made resolving insolvency easier by improving the continuation of the debtor’s business during insolvency proceedings.
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