KENYA: PROPOSED CHANGES TO COMPLIANCE REQUIREMENTS FOR COMPANIES AND LIMITED LIABILITY PARTNERSHIPS
The Anti-Money Laundering and Combating of Terrorism Financing Laws (Amendment) Bill, 2023 (the AML Bill)
The AML Bill amends multiple laws and we set out below a highlight of the relevant corporate law changes.
- Requirement for Foreign Limited Liability Partnerships (Foreign LLPs) to register in Kenya. The Foreign LLP would be prohibited from carrying on business in Kenya until it is duly registered. The Foreign LLP would register an office in Kenya under the LLP Act, 2011 similar to the registration for foreign companies under the Companies Act, 2015.
- Increase in compliance requirements for LLPs, Foreign LLPs, companies, and Foreign Companies. This includes the requirement to maintain registers of beneficial owners, nominee partners, nominee shareholders, nominee directors, or other nominee officials. Private companies with paid-up share capital of less than KES 5,000,000 (approx. USD 35,374.68) and companies limited by guarantee will be required to appoint a company secretary or a Kenyan contact person.
- Increase in powers of the registrar to strike off. The AML Bill proposes to empower the registrar to strike off companies and LLPs that are not carrying on business or in operation or have been wound up. The grounds for this include where the company or LLP has not filed annual returns or financial statements (for companies) in 5 years or more, or where the company or LLP has not filed its register of beneficial owners. The registrar will also have powers to determine an objection to strike off an LLP and restoration of LLPs that have been struck off as a result of administrative mistake.
- Application for striking off an LLP. The LLP can also apply to the registrar for strike-off. However, such an application cannot be submitted if, at any time within the preceding 3 months, the LLP has carried on business, made a disposal for value of property it held for disposal in the normal course of business, engaged in any other activity save that which is necessary for striking off, liquidation, or a statutory requirement.
- Increase in penalties for non-compliance with filing requirements. Certain non-compliance attracts heavier penalties. For example, in addition to the possibility of striking off, failing to file the register of beneficial owners would result in fines, on conviction, of KES 500,000 (approx. USD 3,537.47) for LLPs, companies and officers in default. Further non-compliance would attract fines of KES 50,000 (approx. USD 353.75) per day.
If the proposed changes are passed, companies, foreign companies, LLPs, and Foreign LLPs will incur greater administrative obligations, which also result in additional costs associated with drafting and maintaining compliance documentation including the registers of beneficial owners, nominee officials, partners, shareholders, and directors for between 7 to 10 years.
The AML Bill is currently in the second reading stage before the National Assembly committee of the whole house, which is considering each clause of the AML Bill and any proposed amendments.