Increasing ease of doing business in Kenya

April 16, 2021 - 5 Minutes Read - By Wanjiku Mwai

The Business Laws (Amendment) (No. 2) Act, 2021 (“New Act”) was signed into law on 30th March 2021, thereby coming into effect straightaway. The new Act amends various laws and  is part of the reforms that are aimed at facilitating ease of doing business in Kenya and setting the country on a good base in terms of attracting investors.

Key highlights include

Business Focused

  • Law of Contract Act Cap 23 – the Law of Contract Act has been harmonized with the Companies Act, 2015 by eliminating the requirement of a company seal in execution of documents for companies. This makes it easier when doing online registration or filing of documents for companies.
  • Companies Act, 2015 – Has been amended tot:
    1. Eliminate the reference of the use of company seal as it was deleted by the Business Laws (Amendment) Bill of 2020;
    2. Provide for companies to hold virtual or hybrid general meetings in addition to physical meetings.
    3. Provide for the definition of “virtual meeting” as a “meeting where all members join and participate in the meeting through electronic means including video conference, audio conference, web conference or such other electronic means”.
    4. Provide for the definition of “hybrid meeting” as a “meeting where some participants are in the same physical location while other participants join the meeting through electronic means including video conference, audio conference, web conference or such other electronic means”.
    5. Provide that a notice must specify the means of joining and participating in a meeting in the case of virtual and hybrid general meetings. 

The changes to the Companies Act were brought out by the Covid-19 Pandemic where holding physical meetings was a challenge and companies resulted to online meetings through an advisory by the Solicitor General without the changes to the Law. 

  • Insolvency Act, 2015 – Now allows creditors to seek judicial redress when disgruntled with the apportionment held under a floating charge. 

The amendment also introduces a pre-solvency suspension which seeks to give a company redress by permitting it to stage enforcement action proceedings against the company while it contemplates on the options for rescue, whether by a new investment or formulating a restructuring plan. 

  • Stamp Duty Act Cap 480 – Now exempts payments of a fixed Kshs100 duty charged on contracts chargeable as conveyances on sale. This reduces the cost of doing business as well as the number of tax returns filed monthly.
  • Small Claims Courts Act, 2016 – Now provides for swift settlement of small claims by requiring that they be adjudicated upon within 60 days from the date the claim is filed.

Statutory remittances

The amendment makes changes to various Acts of Parliaments in order to harmonize the date of remitting statutory deductions such that they will be submitted on a single day together with Pay as you Earn (PAYE) which should be remitted by 9th.

  • Industrial Training Act Cap 237 – Now provides that the remittance of the Training Levy will be at the end of a business financial year but not later than the 9th day of the month following the end of the financial year.
  • National Hospital Insurance Fund (NHIF) Act – Now provides that the NHIF remittance will be on the ninth day of the month and not on the first day of the month as earlier provided by the NHIF Act.
  • National Social Security Fund (NSSF) Act, 2013 – Now  provides that employers have to pay the mandatory contributions to the fund on the 9th day of each month or on such later date as may be prescribed. 

The amendment provides that the penalty for default falls due immediately after the ninth day of each month and shall be added to the contribution for each month until the contribution is fully repaid.

It is thus important for employers to amend their calendars accordingly.

Withdrawn Amendments

During the consideration of the Bill in Parliament, the proposed amendments to the National Construction Authority Act (No.41 of 2011) and the Land Registration Act (No.3 of 2012) were withdrawn. This was due to the fact that the two Bills affect counties and therefore would have to be considered by the Senate for concurrence.

Expunging the amendments meant that that the proposed amendments would not be part of the Bill. This was done to expedite consideration of the Bill which would now only require passage by the National Assembly. 

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