COMPANY BENEFICIAL OWNERSHIP IN KENYA.
The benefits of Company beneficial Ownership in kenya have become a topic of discussion today. Beneficial Ownership is a criterion recommended by the Financial Action Task Force (FATF) in its International Standards on Combating Money Laundering and Terrorist Financing and Proliferation. A beneficial owner in company beneficial ownership is a natural or legal person who owns shares in a corporation and has enough control over it to benefit from it. Countries were asked to put the recommendations into practice to combat money laundering, terrorist financing, and the financing of the spread of weapons of mass destruction. As a result, filing beneficial ownership information on time is intended to be a control measure for legal companies. The recommendations include an inter-agency structure to improve domestic cooperation, coordination, and information exchange.
By this recommendation, Kenya passed the Statute Law (Miscellaneous Amendments) Act in July 2019 that amended section 93A of the Companies Act of 2015. It requires that all firms incorporated or registered in Kenya maintain a beneficial owner registration with all necessary details. In a Legal Notice dated February 18, 2020, the Attorney-General also published the Companies (Beneficial Ownership Information) Regulations, 2020 (the Regulations), which put section 93A of the Companies Act into force.
Definition of Beneficial ownership.
A beneficial owner in company beneficial ownership in Kenya is a natural or legal person who owns shares in a corporation and has enough control over it to benefit from it. A natural person is a human individual who is either a member or a director of a corporation and possesses stock in that corporation, whereas a legal person is an incorporated entity that owns stock in another corporation. The person(s) mentioned in the register of members on the date of incorporation or upon later shareholding changes are expected to receive all shares in a company. A shareholder’s beneficial ownership is determined by dividing the company’s nominal share capital by the number of shares held by the shareholder.
The term “beneficial owner” refers to a natural person who, either directly or indirectly:
• has at least ten percent (10%) of the outstanding shares of the corporation;
• has at least ten percent (10%) of the corporation’s voting power;
• has the authority to appoint or remove a company’s board of directors; or
• a person with a great deal of influence or control in a company
As stated by the regulations, significant influence or control implies involvement in the company’s finances or financial policies.
Elements of Beneficial Ownership
It’s vital to examine not just how many shares a beneficial owner owns, but also how much power they have over a legal organization when determining who they are. Holding shares gives you the power to direct, influence, and control transactions in a corporation, making you a beneficial owner. It’s worth mentioning that most companies make decisions based on who owns shares, whether members or directors. Contractual agreements can be made in a variety of settings, and a person can be given control rights without owning or controlling anything.
A complete review of the control rights of parties to an agreement at an offshore level, taking into account the control rights under a shareholder’s agreement, will be required to determine if the controllers must be reported in the case of being in control.
Legislation and companies (beneficial ownership information) regulations, 2020 Kenya.
The Companies Act No. 17 of 2015, which altered Section 93 of the older Companies Act (Cap 486) in 2017 to add the necessity for company beneficial ownership declaration, was the first to introduce the requirement in Kenya. There was no need for a beneficial ownership record under the previous system (Cap 486) because this criterion did not exist.
According to the Statute Law (Miscellaneous Amendments) Act No. 12 of 2019, any firm formed or registered in Kenya must have two different registers: one for members and one for beneficial owners.
• Efficient trading. Because the brokerage firm owns the shares traded under street names, they may be traded more efficiently. To sell them, you do not need to take them to a broker. You can use this to put up automatic order instructions, such as limit orders, to sell at a predetermined price.
• Physical security: The broker, as the registered owner of the shares, is responsible for the shares’ physical safety and security. If they are lost or stolen, you will not be held liable.
• Your brokerage firm will send you notifications: This technique will ensure that you are always up to date on your assets. If there is a tender offer for your shares or if you have a called bond, your brokerage firm may alert you.
Problems of acquiring ownership information
• It’s tough to define risk consistently. Different types of ownership lead to different reporting regulations and gaps, the dangers raised aren’t usually well understood, and cross-border ownership is frequently overlooked.
• The company beneficial ownership data is sufficient, accurate, and timely. The accuracy of data is frequently questioned, and how data is evaluated, monitored, maintained, updated, and cross-referenced differs substantially by jurisdiction. The intricacy is exacerbated by foreign ownership and complex ownership structures.
• Competent authorities are provided access. It is difficult to get reliable, up-to-date beneficial ownership information due to factors such as data protection and privacy legislation, information exchange among regulators, and ways for regulators to access information and sources.
• Nominated shareholder arrangements and bearer shares
The true ownership of bearer shares and related instruments is frequently concealed by nominee shareholders, and authorities have limited access to this information.
• Sanctions and monetary penalties
The sheer volume and size of fines issued have not stopped beneficial ownership reporting violations.
• On a global scale, collaboration
Because of the complexity, the number of agencies involved, the lack of adequate record-keeping, and language difficulties, international coordination is difficult.
3 approaches to identifying beneficial ownership
The means each government uses to keep beneficial ownership information open are completely under its control. There are three techniques to consider:
1. Making use of a register
Through business registers, countries can maintain track of data such as a company’s name, proof of incorporation, legal form and status, registered office address, important governing powers, and board of directors. The information can subsequently be accessed by authorities, financial institutions (FIs), and other regulated entities to verify company beneficial ownership.
If registry information is authentic, up to date, and resilient, this strategy can provide a single source of truth that allows for effective transparency. On the other hand, the FATF points out that these registers frequently lack the procedures and authorities needed to achieve their objectives. Here are a few examples of potential failure points:
• There is a lack of information verification and monitoring.
• A lack of regulatory authority and mandate exists.
• Inadequate investigation skills
• a shortage of resources to achieve broad goals
2. Company approach.
Countries can oblige enterprises to collect and retain accurate beneficial ownership data, which can then be shared with authorities or regulated groups conducting background checks. If the information is reliable, current, and widely disseminated, the corporate technique can be successful.
While this strategy looks to be straightforward, numerous layers of ownership might disguise beneficial ownership, making it difficult for enterprises to access the data they need.
Companies may struggle to define the right behaviors and the level of risk associated with them without clear direction, making openness unequal and impossible to enforce.
3. Existing information Approach
Countries can identify company beneficial ownership information by using databases kept by registries, financial institutions, and other regulated firms, as well as other regulators. This technique delivers the appropriate level of transparency if the information obtained is credible, timely, and sufficient.
Penalty for non-compliance
Failure to comply with company beneficial ownership updating requirements is an offense under the Company’s Act that attracts a penalty of up to Kshs. 500,000 on each liable officer and for subsequent default. The fine tells that the Registrar of Companies does not take it easily to failure to comply with this statutory requirement.
It is worth noting that an officer in a company for purposes of beneficial ownership means any person who holds share(s), that is, a director shareholder or a member. Ownership of share(s)Share Registration is the key qualifier however control becomes another factor to consider especially in a case where control is exercised at an offshore level under an agreement, for instance, in the case of a nominee or a local representative.
Please contact us, Briantony International Consultants at +254114503453 or email us at firstname.lastname@example.org to help you update your Register of Beneficial information and beneficial ownership from Kenya at the Company registry.
Timelines for compliance
The Business Registration Services (BRS) Kenya, has granted all companies registered in Kenya a final extension up to 31st July 2021 to comply with filing their respective Beneficial Ownership Registers by the Companies (Beneficial Ownership Information) Regulations, 2020 for compliance and to avoid the hefty penalties for the non-compliance offense.
Company officers including company secretaries will be required to take swift action to ensure compliance before the due date above stated.
How to update beneficial owners of a company
With the introduction of company beneficial ownership, companies will need to urgently restructure and regularize their shareholding. Strict adherence to their objectives will be inevitable in such a time when the world is grappling with multifaceted security issues. Funding of companies and other registered organizations is now subject to disclosure to authorities to avert the vices that companies may engage in.
Again, and especially in Kenya, all companies including those that have been inactive for a long time will require to be updated in Beneficial Ownership e-Register Kenya to speed up compliance before they are caught up by time.
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