PRESENTED BY CS JACQUELINE WAIHENYA MAINA SENSITIZATION SEMINAR 30 TH OCTOBER, 2015 ELDORET THE COMPANIES ACT, 2015 The Institute of Certified Public Secretaries of Kenya CPS(K) Advocate, Commissioner for Oaths & Notary Public, MCIArb [Arbitration & Adjudication], CPM-MTI [Mediation] / 

Introduction 2 The Companies Act, 2015 draws heavily on the Companies Act, 2006 of the United Kingdom; It has 1,026 sections and runs to over 1600 (excluding the schedules); Cap 486 comparatively had 406 sections covering 270 pages. The scale of this new law therefore goes beyond anything we have experienced before; The Act though assented to on 15 th September 2015 is however yet to become effective and awaits gazettment by the Cabinet Secretary (Attorney General) 23-Jun-16 Institute of Certified Public Secretaries of Kenya

Transition Provisions The Transition and Savings provisions are set out at the Sixth Schedule; For now the Companies Registry will continue in the same manner it has been operating and using the same forms set out in the Companies Act (Cap 486); All companies and company instruments registered under Cap 486 will not be invalidated; Table A will continue to apply to companies incorporated under Cap 486; Directors actions will also be valid; Debenture holders will maintain their rights. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 3

Key Features of the New Act Key features of the New Act include the following:- 1) Delineation of Regulation of Private and Public Companies; 2) Stiff Sanctions for non-Compliance with the Act; 3) Types of Companies; 4) Companies Constitutional Documents; 5) Articulation and expansion of Directors Duties, Qualifications, Disqualifications. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 4

Private -vs- Public Regime The Act has emphasized more stringent regulation of Public Companies & Public Listed Companies; This is as compared to creating a more flexible regulatory regime for smaller companies; In relation to financial reporting a company shall qualify as a small company per s.624(3) in the following circumstances:- (i) It has an annual turnover of less than Kshs.50million; (ii) Its net assets per the Balance Sheet does not exceed Kshs.20million; and (iii) It does not have more than 50 employees. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 5

Types of Companies The company is limited by shares or guarantee – s.6 and the particulars of each are set out at Part II – Companies & Company Formation; S.8 for its part provides for “unlimited” companies; Private & Public Companies are defined at ss.9 and 10 respectively; S.11 has further opened the possibility of a 1(one) person company (corporation sole). 23-Jun-16 Institute of Certified Public Secretaries of Kenya 6

Company Names Many of the Cap 486 provisions survived; New changes in this regard mainly relate to the nomenclature of the Private /Public Companies; (1) Public Companies will now only be registered with a name that ends “PUBLIC LIMITED COMPANY”. This will be abbreviated as “plc” (2) Private companies will remain with the name that ends “LIMITED” abbreviated “ltd”. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 7

Offers to the Public The New Act has defined the meaning and requirements for an offer to the public – Part XIX Public Offers of Securities by Companies; Private companies and companies limited by guarantee may not make any offers to the public. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 8

Foreign Companies The Registrar shall now maintain a Foreign Companies Register – Part XXXVII Foreign Companies; Division 2 of Part XXXVII outlines the procedure for registration; A key development is the requirement that each foreign company must have at least 30% shareholding held by Kenyans by birth – s.975(2); Division 3 further makes it mandatory for a foreign company to have a local representative. Per s.981 the local representative assumes liability on behalf of the Company. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 9

10 23-Jun-16 Stiff Sanctions The New Act has introduced stiff sanctions for non- compliance with the provisions of the Act; The company, its directors and or any other responsible person will now face corporate penalties and/or individual penalties where they fail to comply; The Act provides for fines and/or sentences ranging form Kshs.100,000 to Kshs,15Million and in the case of imprisonment terms of between 1(one) to 5(five) years and in some exceptional cases 10(ten) years – for fraud; The Act has also introduced daily default fines for continuing offences.

Constitutional Documents: Per s.12 the Memorandum is defined a memorandum of the subscribers statement indicating they wish to form a Company and agree to be part of the company; Per Part III the Company’s Articles of Association are the Constitutional documents and there shall be model articles in a prescribed format and it is likely these may differ per different types of companies; S.26 further provides that provisions on the Memorandum of a company incorporated under Cap 486 will be deemed to have been incorporated into its articles. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 11

Company Secretaries 12 Ss.243 – 254 of the Companies Act, 2015 is entitled Company Secretaries:- Key Highlights: PRIVATE COMPANIES (1) Section 243 provides that a Company is only required to have a Company Secretary (CS) if it has a paid up capital of Kshs.5Million or more; (2) If there is no CS then a) service is effected by being addressed to the Company; and b) anything that can be done by a CS will be done by a director or person authorised in that regard by the directors. 23-Jun-16 Institute of Certified Public Secretaries of Kenya

Key Highlights: PUBLIC COMPANIES (1) Section 244 provides that every public company is required to have at least 1(one) CS (2) Section 245 where there is no CS then the Attorney General may direct that the company comply with section 244 and the timeframes and other directions in this regard. (3) If a company defaults per s.244(6) then the company and each officer commit an offence attracting a fine of Kshs.500, and each day they fail to comply attracts a further daily penalty of Kshs.50, Jun-16 Institute of Certified Public Secretaries of Kenya 13 Company Secretaries

Qualifications - Company Secretary Per s.246 directors of a public company shall take all reasonable steps to ensure the CS or joint CSs:- 1) have requisite knowledge and experience to discharge the duties of the Company; and 2) they have suitable qualifications under the Certified Public Secretaries of Kenya Act. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 14

Risks of being a Company Secretary There are huge potential risks under the new Companies Act for non-compliance; These comprise both fines, imprisonment or sometimes offences which carry combination of fines and/or imprisonments. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 15

Directors The New Act has enacted and codified the Directors common law and equitable duties, qualifications and/or disqualifications; Duties: (1) To act within their powers; (2) To promote the success of the Company; (3) To exercise independent judgment; (4) To exercise reasonable care, skill and diligence; (5) To avoid conflicts of interest; (6) Not to accept benefits from 3 rd parties; and (7) To declare any interest in a proposed transaction with the Company. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 16

Execution of Documents Per s.37 the primary manner of execution remains that of affixing the seal; S.37(2) however makes it valid for documents to be executed by two authorised signatories or by a Director whose signature is authenticated; Deeds must be executed and delivered as a deed – s Jun-16 Institute of Certified Public Secretaries of Kenya 17

Timelines for Compliance Timelines for compliance in respect of the following has been significantly reduced:- (i) Annual Returns will now have to be filed within 28 days; (ii) Company charges and debentures will now have to be registered within 30 days of registration at the Lands Registry. Previously the timelines were 42 days for both. 23-Jun-16 Institute of Certified Public Secretaries of Kenya 18

Institute of Certified Public Secretaries of Kenya Jun-16