Adjust new Companies Act to revamp share registry services

Last year, the government enacted the Companies Act No. 17 of 2015 as it sought to modernise governance of the corporate sector. The new Act brought changes to share registry services.

On registration of members, Section 93 (9) of the Act provides that the Registrar of Companies be notified of any changes within 14 days from the date of amendment.

Compliance with the said provision will be challenging and have cost implications on clients who are mainly listed companies while the information could be of little relevance to the Registrar of Companies.

Shares of listed companies trade on a daily basis and consequently changes on their registers are frequent. On average shares worth more than Sh500 million are traded daily at the Nairobi Securities Exchange.

Obtaining information from the Central Depository and Settlement Corporation which credit and debit each investor’s account following successful trades takes time and by the time the information is submitted to the Registrar of Companies it may have already changed significantly due to trading activities.

Share registrars—institutions that is responsible for keeping records of shareholders in exchange for a fee paid by the issuing company— have sought guidance on how listed companies could go about with complying with this provision. The Registrar’s office is yet to respond to query.

The notification to the Registrar of Companies should be done on a monthly basis as is with other regulatory reports.

The Act also provided for changes in holding annual general meetings. Section 282 of the Act gives directors an option of inviting shareholders to general meetings either through a notice in hard copy or through the use of the company’s website.

The notice of a general meeting given by a company through a website has to give members all the relevant particulars, for example, the date, time, place of the meeting and the nature of the meeting for the notice to be effective.

This is a step in the right direction as it will save companies huge amounts of money spent on postage, stationery and other third party costs.

The main challenge with sending notices via the company’s website is that in rural areas there is either slow or in some cases no Internet connection.

In light of this, companies should adopt a prudent approach of issuing their notices in both hard and soft copy. Thereafter, slowly wean the shareholders off the hard copy notices.

The Act in Section 307 (1) also recognises that a company may use an electronic address to receive documents relating to a general meeting.

This means that companies can receive proxy forms from shareholders through the electronic address. This makes it easier for shareholders far from the AGM location to send representative documents.

Proxies have been given more recognition in the Act allowing a representative of a shareholder to chair an AGM if a resolution by the members is passed in the meeting.

This looks good on paper but put in practice may be challenging because there is a lot of input required to chair a general meeting.

Section 292(1) of the Act provides that in the case of a company having only one member, one qualifying person present at a meeting constitutes a quorum.

Companies having more than one member the quorum shall be two subject to the provisions of the articles of association of the company. The previous Act was silent on the issue of quorum.

Sh1 million fine

On record- keeping, the Act in sections 210 and 317 provides for storing of minutes and resolutions respectively for a minimum period of 10 years.

The failure to keep minutes and resolutions for the stipulated duration will attract a fine not exceeding Sh500,000.

The previous Companies Act (Cap.486) did not provide for the duration minutes and resolutions were to be kept by the company.

Consequently, companies have to be innovative in the manner they store their records. Companies could engage firms which provide document management solutions to aid in this issue.

On registration of directors and company secretaries, the previous Companies Act (Cap.486) provided for a combined register of both directors and secretaries.

The new Act requires different registers for directors and company secretaries. Failure to have a directors register attracts a fine of Sh1 million and a fine of Sh500,000 for failing to keep a register for company secretaries.

The new Act requires that directors give a service address. This allows for service of any court process or any other documents to be via the said service address.

Directors have in the past been embarrassed when being served with court process in unsuitable locations.

This will be a thing of the past with service address. The new Companies Act has introduced changes which are positive in light of share registry work.

But there is a need for the Attorney-General’s Office to amend certain provisions of the Act in particular section 93 (9) which if not amended may cause grief for listed companies.

Mr Matheka is an advocate of the High Court of Kenya and a manager at Custody and Registrars Services Group, an institutionresponsible for keeping records of shareholders.