The term “beneficial owner” is defined 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.”
This definition is broadly drafted and it covers not only ownership but also extends to any person who has effective control over a legal person. Accordingly, the amendment will, additionally, require disclosure of the details of the natural person(s) who control a legal person owning a company’s shares. It will, therefore, be necessary to carefully consider, in reference to ownership arrangements and structures, not only matters of ownership but also control, particularly since a natural person can contractually be granted control rights without enjoying any ownership rights.
The beneficial ownership register filing system has been operational as of 13th October 2020 and companies are therefore required to comply with same. There are two main filing and compliance requirements for Kenyan companies:
1. Companies are required to submit the beneficial ownership registers within 30 days of its preparation.
2. Companies are also required to notify the Registrar within 14 days of any change in beneficial ownership information.
HOW BENEFICIAL OWNERSHIP IS DETERMINED
The Act doesn’t provide for a selected threshold in shareholding or control in respect of which beneficial ownership information should be disclosed. However, under the Regulations, beneficial owners are those that meet any of the subsequent conditions:
1. Holds at least 10% of the issued shares in the company either directly or indirectly.
2. Exercises at least 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.
4. Exercise significant influence or control, directly or indirectly over the company.
In addition, companies have to take note of paragraph 32(1) of the Second Schedule of the Tax Act (Cap. 470) where “control” is defined as the holding of shares or voting power of 25% or more. This means that when filing beneficial ownership registers, companies may have to disclose beneficial shareholders who are actually not in a position of influence in the company.
PENALTIES FOR NON-COMPLIANCE
Although the Act doesn’t set a particular date by which companies are required to submit their registers, compliance is required as soon as possible.
Failure to organize and submit the beneficial ownership register renders a corporation non-compliant and hence it’s an offence. As per a press release issued by the Business Registration Service (BRS), non-compliant companies will be liable to a fine up to KES 500,000 (approx. USD 4,800) upon conviction.
In a recent press release published on the 27th January 2021, the Business Registration Service says that it has taken note of the progress made in filling the beneficial ownership registers and within the spirit of encouraging compliance with the Act, it’s granting a final grace period of six months until 31st July 2021 to file beneficial ownership registers.
HOW WE CAN HELP
As Imperial Registrars, we assist our client companies to comply with the Companies (Beneficial Ownership Information) Regulations, 2020 by preparing and maintaining the Beneficial Owners Register as well as identifying and giving notice to the beneficial owners to provide the details required by the Regulations. Kindly get in touch with us for further assistance or professional assistance on the above. (Info@imperialregistrars.co.ke)