The law requires new firms to fill the Beneficial Ownership Information e-register at the companies’ registry.
Regulations are also aimed at curbing money laundering by revealing the true identity of investors.
More than half of registered private companies are yet to disclose details of beneficial owners, including names and residential addresses, hurting the State’s push to curb corruption involving public tenders.
Data from the Business Registration Service (BRS), the custodian of a list of all companies and information for entities registered in Kenya, shows only 43.05 per cent of the private firms had declared their business ownership status at the end of June 2023.
The proportion of firms with declared ownership status was up from 36.1 per cent in the year ended June 2022 and is despite BRS conducting outreach activities to emphasise the obligations of companies in line with the Beneficial Ownership Information Regulations of 2020.
“The service did not meet the target due to system change and upgrade hitch which slowed the process,” says BRS in the budget proposal report to the National Treasury.
Beneficial owners
The law requires new firms to fill the Beneficial Ownership Information e-register at the companies’ registry ahead of registration and existing firms to comply within the set timelines in what marked a major shakeup of shareholders records.
A beneficial owner of a company is described as an individual with control over an express trust or on whose behalf an undertaking takes place.
The burden of providing the details to the State rests with companies, with the regulations providing for up to Sh500,000 fine for those in breach.
The regulations also require companies to issue warning notices to beneficial owners who fail to provide their personal details including full name and where they live and inform them of the intention to restrict their rights.
Enforcement gap
There have been challenges in enforcing compliance and BRS is preparing draft amendments to the Companies Act 2015 to give it administrative sanctioning powers to deal with companies that fail to timely submit beneficial ownership information.
The restrictions to such beneficial owners include voiding the transfer of their interest and not making any payment from the company in respect of their interest.
Besides fighting graft and conflict of interest, the regulations are also aimed at curbing money laundering by revealing the true identity of investors owning large blocks of shares in both private and listed companies, who are also of interest to the Kenya Revenue Authority.
Companies filing beneficial ownership information are required to first identify who their beneficial owners are before giving notice to the person it has identified as the beneficial owner.
Deregistration of firms
The beneficial owners are then required to provide details to the registrar including their names, KRA PIN, national ID or passport copies, postal address, residential address, occupation, telephone number and the date when they became beneficial owners.
A person holding at least 10 percent of the issued shares in a company directly or indirectly is a beneficial owner alongside persons who exercise at least 10 per cent of the voting rights in a company.
Persons who hold a right to appoint or remove a director of the company and those exercising significant influence or control also rank as beneficial owners.
The Treasury last year said BRS would start striking off companies from the company register for non-compliance with the beneficiary ownership rules to force more firms into compliance.
The sanctioning powers will be a departure from the current practice where only criminal sanction is permitted under the law, limiting the range of sanctions that can be imposed.
