Kenya plans to automate all post-registration services—including transfer of shares and changes in directorships—in a bid to shorten turnaround times and curb identity theft.
The Business Registration Service (BRS) says it has re-engineered and developed an enhanced automated service to make the filing of changes to company officials easier, faster, and secure.
Under the automated system, directors being replaced will, for example, receive a one-time password (OTP) on their mobile phones for verification—a shift from the current arrangement where notifications are sent by email or where individuals are required to physically visit the offices of the BRS.
“The enhanced process will automate the end-to-end confirmation of new director appointments, as well as the resignation of directors and transfer of shares, through multi-factor authentication using a one-time password,” said BRS director general Kenneth Gathuma.
“Particularly, this new component (OTP) is critical in safeguarding investments by the public in the form of shares and curbing incidents of identity theft and fraudulent lodgments,” added Gathuma.
Mr Gathuma added that under the new system, directors being appointed in a company will have to give their nod first before the changes are made, in what the registrar of companies says is “expected to aid in safeguarding personal data.”
This, he explained, is in line with the requirements of the Data Protection Act 2019, by ensuring that personal information is not used to appoint persons in companies without their consent.
Besides company registration, BRS's day-to-day mandate extends to post-registration services, including facilitating the appointment of new directors or the removal or replacement of existing ones, as well as updating the company secretary's details.
The state agency also records changes in share ownership, including the sale, transfer, or issuance of new shares, and updates registers to reflect the ultimate beneficial owners.
Officials at the BRS noted that the automation will significantly reduce the turnaround time for post-registration services, with the time it takes to effect directorship changes expected to fall from approximately 14 working days to five working days.
These changes are expected to go live on BRS version 2, with the registrar of companies set to receive views from the public by January 20. Companies are required to notify BRS of any change in directors within 14 days.
Publicly listed companies regularly make changes to the composition of their boards at their annual general meetings (AGMs), making them the biggest beneficiaries of the changes.
Generally, companies change directors when a director resigns, retires, or dies. Board composition may also be altered by changes in ownership or shareholding, or when a company undergoes restructuring, a merger, or an acquisition.
There are also instances where the push comes from lenders or regulators.
Back in 2015, the Registrar of Companies issued an alert over rising cases of land fraud committed by rogue company secretaries who altered directors and ownership status of property firms before selling them.
The fraud often starts with the rogue company secretary notifying the Registrar of Companies of a change in directorship and ownership of land-buying companies.
Last year, the Investigation and Enforcement Unit of the Kenya Revenue Authority (KRA) said it unearthed a racket in which unsuspecting individuals, including domestic workers, were made directors or owners of companies without their knowledge.
In the racket, dubbed an identity theft tax evasion scheme, perpetrators use individuals’ ID details and PINs to register companies that are then used as conduits for tax fraud, including fictitious Value Added Tax (VAT) returns, according to several court filings.
