The Companies Act 2015 (the Act) is amongst a suite of new laws intended to streamline business in Kenya, by making it easier for entities to establish a presence and operate. Although quite voluminous, the Act takes into consideration, developments in technology and procedure, to boost the ease of doing business. In addition, the Act codifies and gives life to the now generally accepted principles of corporate governance. Discuss the key changes/amendments made in this law (25mks)

 

To answer this question, it is important to note that the Companies Act 2015 was approved by the President on September 11, 2015, and only Section 2 of the Act came into force on the day of publication on September 15, 2015. All other sections and parts  were to come into force after the announcement in the newsletter of the Cabinet Secretary and the Attorney General in charge of company affairs. One of the important features of the new law is the deliberate difference between the regulatory matters of a private company and public or listed companies. Emphasis was placed on introducing a simple interaction regime for small companies, thus reducing business time and costs, while providing more control and accountability for companies with people's participation.

The specific key amendments made in this laws includes:

1. After the Companies Act was amended in 2017 to include explicit provisions requiring companies to retain information about the beneficial ownership of a company's shares, a new section 93A specifically has now been included in the Act.

a. All companies must maintain a beneficial owner registration. This includes all the information provided in the rules relating to useful ownership.

b. If the company does not provide the beneficiary to the Registrar of Companies within 30 days of preparation , a fine of KES 500,000 will be imposed.

2. With the exception of single member companies, all companies are now required to hold annual general meetings.

Prior to entry into force of the Companies Act, 2015, option to hold annual general meeting was an option by private companies as no provisions requiring them to do so were included in the Act. This position has now been changed, and all companies except single member companies are required to hold annual general meetings failing which an offence shall have been committed which carries a fine of KES 100,000 on conviction.

3. No new member will be added without the consent of all the existing members as the the Companies Act now requires private companies to have a requirement in their Articles of Association . The consents or letters of no objection will be required from all existing members of a company before selling shares of an existing member .

4. The option to authorize a company to use the company's powers to allocate shares to its directors has been revoked . Instead,  permission can now only be obtained through a resolution of the members of the company, which means that for any allotment of shares, a specific permission of the members has to be obtained.

5. Threshold to compulsorily buy out non-assenting shareholders in a takeover bid has reduced to 50% . Initially,  the threshold stood at 90% and the reduction to 50% will have a key impact on any takeover bids in Kenya. 

6. The employee threshold for a company to qualify under a small company regime has been reduced from not more than 50 employees to not more than 25 employees.

Basically, the amendment made to this law includes;  all companies are now required to hold annual general meetings With the exception of single member companies. No new member will be added without the consent of all the existing members as the the Companies Act now requires private companies to have a requirement in their Articles of Association . The option to authorize a company to use the company's powers to allocate shares to its directors has been revoked . Instead,  permission can now only be obtained through a resolution of the members of the company, which means that for any allotment of shares, a specific permission of the members has to be obtained. Threshold to compulsorily buy out non-assenting shareholders in a takeover bid has reduced to  50% . Initially,  the threshold stood at 90% and the reduction to 50% will have a key impact on any takeover bids in Kenya. Lastly, The employee threshold for a company to qualify under a small company regime has been reduced from not more than 50 employees to not more than 25 employees.