The Statute Law (Miscellaneous Amendments) Act, No. 12 of 2019 amended several Acts of Parliament including the Companies Act, 2015 (“the Companies Act”). In our previous update, we discussed some of those changes. Key amongst them was the introduction of section 93A which required every company to maintain a register of beneficial owners.

To give effect to the section, the Attorney General has published the Companies (Beneficial Ownership Information) Regulations, 2020 (“the Regulations”) vide Legal Notice Number 12 of 2020 dated 21^st February 2020.

The Regulations define 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.

A beneficial owner shall meet any one of the following conditions:

1. Holds at least ten percent (10%) of the issued shares in the company either directly or indirectly;
2. Exercises at least ten percent (10%) of the voting rights in the company either directly or indirectly;
3. Holds a right, directly or indirectly, to appoint or remove a director of the company; or
4. Exercises significant influence or control, directly or indirectly, over the company. (Per the Regulation, significant influence or control means participation in the finances and financial policies of a company without necessarily having full control over them.

Every company is required to identify its beneficial owners and enter their particulars (as set out in the Regulations) in the company’s register of members. The register of beneficial members shall then be lodged with the Registrar. Any changes to the register shall also be lodged with the Registrar.

The Regulations place a duty on the company to investigate and obtain particulars of its beneficial members. A company shall be required to give notice to a person it knows or has reasonable cause to believe is a beneficial owner of the said company, and ask of the person to provide the particulars as required. Any person served with such notice should respond within twenty-one (21) days with the required particulars unless the court has directed that any such information should not be disclosed.

Failing to comply with the request for particulars within 21 days may result in the issuance of a fourteen (14) days’ warning notice threatening the restriction of the relevant interest of the person. The relevant interest means the shares held by the person, the voting rights exercised and the right to appoint or remove any member of the board. Some of the effects of the restriction will be that any transfer of the interest shall be void and no rights shall be exercisable in respect of the interest.

Disclosure of the information on the beneficial owners of a company contrary to the Regulations shall be an offence, which on conviction shall attract a fine not exceeding twenty thousand shillings (approximately US$ 200) or imprisonment for a term not exceeding six (6) months or both.

Please contact us at Info@cfllegal.com should you require further information.