Written by: Viona Ochola and Magdalene Kariuki

Background:
The Companies Act (Act no. 17 of 2015) was amended by introduction of a new Section 93(A) through the Statute Laws (Miscellaneous Amendment) Act (Act No. 12 of 2019) which made it mandatory for each company to maintain a register of beneficial owners. This amendment lifts the lid off the confidentiality that comes with the use of nominee shareholders (shareholders who are non-members of the client and prefer anonymity) as Companies are required to file and update the list of its Beneficial Ownership information.

This amendment of the law was necessitated by:

• The need to create greater transparency in the ownership of companies in Kenya; and
• The need to support the Government in the fight against corruption, money laundering and financing of terrorism

The amendment was also necessitated by Kenya’s need to comply with the Financial Action Task Force (FATF) recommendations. FATF is a global standard setting body for Anti-money laundering compliance and it established the recommendations for countries to adopt in dealing with money laundering and related offences including crimes involving corporate structures which have a global nature.

Who is a Beneficial Owner?
A beneficial owner of a Company is defined as “the natural person who ultimately owns or controls” a legal person (e.g. a company) or the natural person on whose behalf a transaction is conducted and includes those persons who “exercise ultimate effective control” over a legal person.

Ultimate ownership of a company is where the ownership of the company is exercised through a chain of ownership. Ultimate control means significance in the participation in finances and financial policies of a company without necessarily having ownership in the company.

In essence, a beneficial owner is the natural person who directly or indirectly:

• Holds at least 10% of the company issued shares (directly or indirectly) – A shareholder who is a natural person and holds at least 10% shares in a company is categorized as one having a direct control while a shareholder who is a corporate body, all shares are held by it indirectly. Therefore, when providing beneficial ownership information, the corporate body will be required to provide beneficial owner’s particulars of that corporate body;

• Exercises at least 10% of the voting rights – Please refer to the Articles of Association or a shareholders’ agreement of a company that contains any special provisions with regards to voting rights;

• Holds a right to appoint or remove a director of the company – Please refer to the Articles of Association or shareholders’ agreement of a company that contains any special provisions with regards to appointment or removal of directors; and/or

• Exercises significant influence or control over the company’s finances and financial policies -This may be derived from persons who have entered into transactions with the company or offered debt capital capable of directly or indirectly granting effective control over the company.

Particulars of the Beneficial Owner Required

The beneficial owner is required to disclose their details which include full name, identification data (National Identification Card Number/ Passport No or birth certificate number) KRA PIN details, Nationality, Date of Birth, Email Address, Postal Address, Occupation, Link of Beneficial Owner with the Company, business address, residential address and the nature of ownership or control. The Regulations prescribe the form to be filled and filed with the Registrar (Form BOF1).

The Beneficial Owner is also required to indicate the source of the beneficial ownership information and whether the information obtained was (a) provided by the beneficial owner or their authorised representative; (b) taken from an official register; or (c) provided by a third party not directly related to the beneficial owner.

When is beneficial ownership information required to be filed?

• during the initial incorporation of a company;
• during linking of a company on e-Citizen portal through the Business Registration Service (BRS) platform;
• as an update of the Beneficial Ownership Register for existing linked companies; and
• as an amendment to the existing companies’ beneficial ownership information.

When is the deadline for Compliance?
The Registrar of Companies has granted Companies a grace period of up to 3st January 2021 within which period all officers of the Company and their authorised representatives are required to have filed/updated their Beneficial Ownership details.

If a Company fails to comply with the requirement to update its records of beneficial ownership, the Company and its officials will be penalised and liable to pay a fine of Kenya Shillings Five Hundred Thousand (Kshs. 500,000.00) and on conviction the Company and each officer of the company who is in default commits a further offence and are liable to a fine of Kenya Shillings Fifty Thousand (Kshs. 50,000) for each day the Company is not compliant.

Confidentiality of/Access to Information

The regulations “safeguard” confidentiality by providing that beneficial ownership information
shall not be disclosed to the public.
Access to BO information is restricted to the following circumstances:

• Compulsion by the company to disclose BO information under court order ie where there is an ongoing investigation involving the company;
• Request by competent authorities and law enforcement agencies to the registrar of companies;
• Consent by the beneficial owner to have BO information specific to themselves disclosed to a third party;
• Disclosure of BO information by the company to the beneficial owner through company correspondences and notices.
• Disclosure of BO information by the company to the registrar of companies.

A person who irregularly discloses beneficial ownership information risks a fine not exceeding KES 20,000, imprisonment for up to 6 months, or both.

How to file beneficial ownership information:
This is done at the Business Registration Services Portal (E-Citizen) by a director or company secretary of the company. The company ought to be linked to the E-Citizen Portal and accessible by any of the shareholders/ directors through their individual E -Citizen If the company is not linked, the shareholders/directors of the company ought to commence the linking process before filing of the beneficial ownership information.

Business registrations not required to file beneficial ownership information

• Business Names
• Partnerships
• Companies Limited by Guarantee
• Public Companies

Ultimate Intention of Disclosure

• Identification and verification of the beneficial owners of a legal entity
• Keep the BO information accurate, up to-date and accessible in a timely manner to restricted categories of persons
• Promoting a self-regulated approach to implementing BO regulations

Annual Compliance
Companies should incorporate BO Information Disclosure in their annual compliance processes to ensure any changes are updated regularly.

About Viona Ochola: is an Advocate of the High Court of Kenya and sole Partner at Viona Ochola & Associates Advocates. She boasts of ten (10) years post admission successful and insightful practice molded by her keen and strategic eye to legal matters and impulse to deliver quick, sensible, accurate information and legal advice to her clientele. She has also overseen a wide range of conveyancing transactions by advising on the acquisition and sale of real estate, development projects and other properties which have called for innovative transaction structuring, creative drafting of sale and purchase agreements and attentive oversight of the transfer of interests in relation to real and personal properties.

For more information or further assistance please contact: vionahochola@gmail.com or
viona@vionalaw.co.ke or call 0720 485005.