REQUIREMENTS TO MAINTAIN A BENEFICIAL OWNERSHIP REGISTER

Introduction

On 18^th November 2020, the Attorney General vide Legal Notice No. 12 of 2020 published the Companies (Beneficial Ownership Information) Regulations, 2020 (the “Regulations”). These Regulations derive from section 93A of the Companies Act, 2015 (“the Act”) which makes it mandatory for companies to keep and lodge with the Registrar of Companies a register of its beneficial owners before the 31^st of January, 2021.

The Regulations require companies and other legal entities incorporated in Kenya to take all reasonable steps to gather and maintain adequate, accurate and current information on their “beneficial owners” on a beneficial ownership register as and from October 2020.

This is seen as a move by Kenya to align herself with international standards and requirements set out by the Financial Action Task Force on Money Laundering (FATF) which Kenya belongs to by virtue of its subscription membership to the Eastern and Southern African Anti-Money Laundering Group (ESAAMLG), an associate member of the FATF, whose main purpose is to combat money laundering and terrorism in the region.

Among the main objectives of the ESAAMLG is to implement recommendations by the FATF which ensure that individuals with significant economic interests in a relevant entity can be identified for the purposes of combating terrorist financing, money laundering and corruption.

Who is a Beneficial Owner?

Under the Act, a “beneficial owner” is defined as “the natural person who ultimately owns or controls a legal person or arrangement or the natural person on whose behalf a transaction is conducted, and includes those persons who exercise ultimate effective control over a legal person or arrangement”.

A beneficial owner of a business is therefore a natural person who meets any of the following conditions in relation to a company:

1. holds at least 10% of the issued shares either directly or indirectly,
2. exercise at least 10% of the voting rights in the company either directly or indirectly,
3. holds a right, either directly or indirectly, to appoint or remove the director of the company, or
4. exercises significant control directly or indirectly on the company.

What are the requirements?

With effect from October 2020, companies must create an internal register of their beneficial owners.  The Regulations further require companies within 30 days of incorporation, to lodge the list of Beneficial owners with the Registrar of companies. In the event of amendments to the register, the time frame given is 14 days to effect the changes. However, these timelines do not apply to publicly listed companies.

In an instance where the beneficial owners are not known, the company must take “all reasonable steps” to ensure the beneficial ownership information is gathered and recorded on the beneficial ownership register.

Further, in the event that no beneficial owners can be identified, a company may enter the names of the directors of the relevant entity on the beneficial ownership register as the “beneficial owners”.

The register of beneficial ownership must contain the following information in respect of each beneficial owner:

1. name, date of birth, nationality and residential address,
2. statement of nature and extent of interest held,
3. date of entry as a beneficial owner on the register, and
4. date of entry of ceasing to be a beneficial owner.

The beneficial ownership register will need to be kept updated whenever there is a change in beneficial ownership, the extent of interest/control or a change in particulars.

It should also be noted that a change in directorship may also trigger an update to the beneficial ownership register, where no beneficial owners have been identified and the directors have been entered in the register as the “beneficial owners”.

Penalties for non-compliance

It is imperative that companies ensure compliance with the Regulations and more so take advantage of the ongoing grace period granted by the Companies Registrar which expires on 31^st January, 2021.

It should also be noted that failure by a relevant entity to comply with any of the above obligations is a criminal offence and on conviction each liable to a fine not exceeding Kenya Shillings five hundred thousand (KES 500,000/-). If following conviction, the company remains non-compliant, the company and each of its officers in default commits a further offence on each day of which the failure continues and on conviction are liable to a fine not exceeding Kenya Shillings fifty thousand (KES 50,000/-) for each such offence.

Conclusion

If successfully implemented, the regulations would see tax evasion, money laundering and eventually corruption in both the public and private sectors significantly decline. This is because uncovering and fighting illicit financial flows requires information on who owns, controls or ultimately benefits from any business involved in potentially illegal activities: namely, the beneficial owners. Having this information readily accessible would assist authorities in investigations and prosecutions against financial crimes.

How we can help

At AGO Advocates LLP, we are committed to ensuring all our corporate clients comply with all legal and regulatory requirements. In regard to the Companies (Beneficial Ownership Information) Regulations, 2020, our services include the creation and maintenance of the Beneficial Owners Register as well as identifying and giving notice to the beneficial owners to provide the details required by the Regulations.

Get in touch for any inquiry via (+254) 020-22 11122 /0100 211 122 or (info@agoadvocates.com)