Beneficial Ownership obligations extended to Foreign Companies in Kenya

26th October, 2023

Author: Anjli Maru-Shah

The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Act, 2023 (the Act) which became effective on 15 September 2023, amends various laws and buttresses the fight against money laundering and terrorism financing in Kenya. The Act inter alia introduces new obligations with respect to disclosure of beneficial ownership for foreign companies (more popularly known as a branch company) registered under Part XXXVI of the Companies Act, 2015.

Mandatory disclosure of beneficial owners for companies incorporated in Kenya was introduced in 2020 with the enactment of the Companies (Beneficial Ownership Information) Regulations, 2020. A beneficial owner is defined as any natural person who ultimately owns or controls a legal person or on whose behalf transactions are made. In a nutshell, a beneficial owner is someone who: (i) directly or indirectly holds at least 10% of the issued shares in a company; (ii) possesses the direct or indirect power to appoint or remove a director of the company; (iii) indirectly or directly exercises significant influence or control; and (iv) directly or indirectly exercises a minimum of 10% of the voting rights in a company.

The provisions for beneficial ownership reporting applicable to companies incorporated in Kenya following the enactment of the Act now extends to foreign companies irrespective of whether that foreign company is required to maintain beneficial ownership information in its country of incorporation. The import of this is that going forward, foreign companies will be required to disclose their ultimate beneficial owner, which has not been the case in the past.  

A foreign company to be registered in Kenya is now required to provide a statement of particulars of the beneficial owners of the foreign company as one of the accompanying documents during the application for registration of foreign companies while a foreign company already registered under the Companies Act is required to file its beneficial ownership information within 60-days from the provision under the Act coming into force (i.e., by 15 November 2023) with an option of applying for an additional 30-day extension.

The Act also introduces a continuous obligation for foreign companies operating within Kenya to regularly report any changes to beneficial ownership within 14-days after the change. A foreign company is now, like all companies required to keep records of its beneficial owner’s information for at least 10 years from the date which a person ceases to be a beneficial owner.

The Act imposes penalties on the foreign company and each of its officer for non-disclosure or providing misleading information and are on conviction each liable to a fine not exceeding KES.500,000 and if, after a foreign company or any of its officers is convicted of an offence, the foreign company continues to fail to comply with the relevant requirement, the foreign company, and each officer of the company who is in default, commit a further offence on each day on which the failure continues and on conviction are each liable to a fine not exceeding KES.50,000 for each such offence. Additionally, there is an administrative penalty for late filing of KES.2,000 payable to the Registrar of Companies.

In view of the above, businesses should thoroughly review their current ownership and control structures, identify their beneficial owners and update the information in their records accordingly to ensure compliance with the Act.

The changes carry an increased compliance burden. As to whether they are welcome forms part of the debate on whether Kenya remains an investment-friendly destination, considering that in most instances, the likelihood of breach will more than likely derive from the inadvertent omission to notify a change in particulars at the offshore level, not the deliberate withholding of information meriting the imposition of a fine.

For further information, please contact Anjli Maru-Shah or any of our other partners.