REQUIREMENT FOR DISCLOSURE OF BENEFICIAL OWNERSHIP OF COMPANIES FULLY OPERATIONALISED
On 28th February 2020 the Attorney-General published the Companies (Beneficial Ownership Information) Regulations, 2020, fully operationalising section 93A of the Companies Act 2015 which requires every company to notify the Registrar of Companies of its beneficial owners.
This follows the introduction of s. 93A in 2019, in what can be surmised as an acceleration of attempts to promote transparency in the ownership of companies in Kenya in line with international efforts to combat money laundering and terrorism financing spearheaded by the Financial Action Task Force.
The Act defines a beneficial owner as “the natural person who ultimately owns or controls a legal person or arrangements 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”.
The Regulations expound on this definition by identifying a beneficial owner as a natural person who meets any of the following conditions:
- holds at least ten percent of the issued shares in the company either directly or indirectly;
- exercises at least ten percent of the voting rights in the company either directly or indirectly;
- holds a right, directly or indirectly, to appoint or remove a director of the company; or
- exercises significant influence or control, directly or indirectly, over the company.
Every company is now required to take reasonable steps to identify its beneficial owners, and maintain a register with their particulars including full name, birth certificate number, national identity card number or passport number, personal identification number, nationality, date of birth, postal, business and residential address, telephone number, email address, occupation or profession, nature of ownership or control (as per a – d above), the date on which a person became or ceased to be a beneficial owner, as well as any other relevant detail the Registrar may require from time to time.
Interestingly, neither the Act nor the Regulations prescribe a deadline for the preparation of a register of beneficial owners, other than the obligation to take ‘reasonable steps’ to do so. It remains to be seen how the absence of a deadline will impact achievement of the objectives of s. 93A. However once prepared, the information must be lodged with the Registrar of Companies within thirty days, failing which the company and each officer will have committed an offence and liable to pay the stipulated fines.
While the Regulations prohibit the disclosure of beneficial ownership information to the public, a carve out exists in relation to requests for information made to the Registrar by criminal investigation and law enforcement agencies and financial sector regulators. Otherwise, a company is prohibited from using or disclosing any information about its beneficial owner, except:
- with written consent of the beneficial owner;
- for communicating with the beneficial owner concerned;
- in order to comply with any requirement of the Regulations; or
- in order to comply with a court order.
Disclosure of beneficial ownership information in any manner other than for the purpose for which such information is an offence and punishable with a fine not exceeding KES 20,000.00 or to imprisonment for a period not exceeding six months, or to both.
If you would like further information or guidance on this development, please do not hesitate to contact us.
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