UNDERSTANDING THE COMPANIES (BENEFICIAL OWNERSHIP INFORMATION) REGULATIONS, 2020
Published On 26th May 2020
The Companies Act, 2015 (“Act”) has brought about significant changes in the corporate world in Kenya. One such significant change being disclosure requirements of beneficial ownership of shares or shares held by nominees for the benefit of a beneficiary.
The Regulations recognise beneficial ownership of shares (which was previously not recognised).
Supplementing the definition of a “Beneficial Owner”, the Regulations provide that a beneficial owner shall be a natural person who satisfies the following criteria:-
If a company does have shares issued through a nominee structure and which structure the Regulations apply, then the company is now required to take reasonable steps to identify the beneficial owner of any shareholder (who falls within the stated criteria) and who is a nominee or trustee or a corporate shareholder.
The Regulations further prescribe the particulars which a company is required to enter in its register of beneficial owners, some of which are:-
Over and above, the Regulations, have a general provision that the company should be in a position to obtain “any other relevant detail the Companies Registrar may require from time to time.”
The Regulations provide for the procedure which a company should take where one of its officials (falling within the definition of a beneficial owner or a person whom the company has reasonable cause to believe is a beneficial owner of a company) fails to provide the particulars.
The Regulations exempt persons who have received notice of disclosure and who pursuant to such notice of disclosure, have obtained an order prohibiting disclosure from the High Court of Kenya.
Where a person fails to comply to provide information of beneficial ownership, a restriction on such person’s relevant interest (i.e. shares held; voting rights; or the right to appoint or remove any member of the board of directors) in the company is required to be noted.
The effect of a restriction issued under the Regulations is that:-
To safeguard the interest of beneficial owners, the Regulations specify that a company shall not use or disclose any information about its beneficial owners, except-
There is a general provision permitting disclosure, with written consent of the beneficial owner or shall only be made available to a competent authority (i.e. Attorney-General, any criminal investigation agency established by law, law enforcement agencies, authorities that supervise and monitor the financial sector, including the Financial Reporting Centre and the Kenya Revenue Authority) upon a written request by the competent authority to the Registrar.
It should be noted that although the Regulations have been published, neither the Act nor the Regulations prescribe a deadline for the preparation of the register of beneficial owners. The only obligation is to take steps to comply as the Regulations have taken effect.
In the absence of time lines, enforcement will remain an issue, since the information is required to be lodged with the Registrar of Companies “within 30 days”, failing which the company and each officer will have committed an offence and be liable to pay the stipulated fines.
Should you have any queries or need any clarifications with respect to corporate matters, please do not hesitate to contact Vikram C. Kanji or Ruby Njenga at A.B. Patel & Patel Advocates, Mombasa.
The contents of this publication are for reference purposes only. They do not constitute legal advice and should not be relied upon. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.