Corporate, Investment and Banking Law Amendments                                                                        

The President of the Republic of Kenya assented to the new Finance Act, 2016 (the “Act”) on 13^th September, 2016. The new law introduces amendments to various pieces of legislation.

This insight summarizes the changes introduced by the Act to the Companies Act 2015, the Retirement Benefits Authority Act 1997, The Capital Markets Act (Cap 485A), and the Banking Act (Cap 488), Laws of Kenya.

1. THE COMPANIES ACT, 2015

Deletion of 30% Local Shareholding Requirement for Foreign Companies

Change effective on 1^st January, 2017

Section 975 (2) (b) of the Companies Act, 2015 which provided that for a foreign company to be registered in Kenya, it had to demonstrate that at least 30% of its shareholding was held by Kenyan citizens by birth, has now been deleted. This section acted as a barrier to foreigners hence its removal will help encourage foreign investment in Kenya.

2. THE RETIREMENT BENEFITS AUTHORITY ACT, 1997 (the “RBA”)

a) Renewal of Registration Certificate – Change effective from 1^st January, 2017

The Act introduces changes to the validity of registration certificates issued to registered retirement schemes under the RBA. The certificates shall be valid until revoked by the Authority and shall not require annual renewal as was the case before.  The Act further introduces reporting requirements for the custodians or administrators of retirement schemes to be met by the 30^th of September every year.

b) Disclosure of Changes – Change effective from 1^st January, 2017

The scheme custodians or administrators are mandated to submit records of their schemes’ current audited financial statements, a list of the directors and top management, any changes in clientele and such other information as the Authority may require. Any changes in the shareholding of a scheme must be reported to the Authority within thirty (30) days of the change.

3. THE CAPITAL MARKETS ACT (CAP 485A) (the “CMA”)

Online Forex Brokerage – Change effective from 1^st January, 2017

The CMA is amended to recognize online forex brokerage by introducing the definition of an online forex broker to the definition section of the CMA and empowering the Minister to make rules and regulations on such brokerage. The amendment will enable the law to catch up with the rapidly evolving sector.

4. THE BANKING ACT (CAP 488) (the “BA”)

a) Sharing of Credit information – Change effective from 1^st January, 2017

Section 45 of the Act extends the obligation of publication and sharing of credit information, previously a preserve of banks, to institutions licensed under the Sacco Societies Act, 2008, as well as public utility companies. The BA is further amended to provide for the transfer of trans-border credit information between regulators or supervisory authorities and credit reference bureaus or entities performing similar roles provided that there is a mutual legal framework for the sharing of credit information; and the credit information is required for the discharge of a lawful duty or the performance of a lawful purpose by the person requesting for the information.

b) Enhancement of Penalties – Change effective from 1^st January, 2017

The Act goes on to amends section 55 of the BA by increasing the amount of penalties to be paid by institutions, credit reference bureaus (or any other person) that fails or refuses to comply with any directions of the Central Bank under the Act or Prudential Guidelines, from the previous K.shs.5,000,000.00 to K.shs.20,000,000.00 in the case of an institution or credit reference bureau and from K.shs.200,000.00 to K.shs.1,000,000.00 in the case of a natural person. An additional penalty of K.shs.100,000.00 for each day or part thereof during which such failure or refusal continues shall also be charged.

c) Enhancement of Core Capital – Change effective from 31^st December, 2017 onwards

Finally, the Act amends provisions on the minimum core capital for banks and mortgage finance companies to at least K.shs. 5,000,000,000.00 by 31^st December, 2019. The minimum core capital shall be implemented as below:-

For further information please contact Jacqueline@cfllegal.com