Types of Companies that can be Incorporated in Kenya
Companies in Kenya may be registered as public or private companies. A private company may be limited by shares and guarantee. Additionally, persons may also incorporate a private unlimited company in which the liability of members for the debts of the company is unlimited.
The Companies Act of Kenya (No 17 of 2015) defines a private company limited by shares as one where a shareholder’s liability is limited by the amount unpaid on the shares held by the member. This means that the extent of a shareholder’s liability is limited to only their portion of the unpaid capital. This type of company is favoured by promoters seeking to do business in Kenya and indeed is the most common type of company incorporated in Kenya.
On the other hand, a company limited by guarantee is one where the liability of members is limited by the amount that the members undertake, by the articles of association, to contribute to the assets of the company in the event of its liquidation. This means that the members of the company guarantee to contribute money in the event of liquidation, but the company does not have a share capital. This is the type of company favoured by persons engaged in charitable activities or activist causes. Any profits or revenues earned by the company are usually ploughed back into the company to facilitate continued engagement in the charitable causes the company limited by guarantee is engaged in.
A public company is one in which members of the public are offered shares to subscribe to, Such a company has limited liability.
Statutory Aspects Pertaining to Companies Incorporated in Kenya
1. Companies in Kenya are required to pay corporation tax at a rate of 30% on worldwide income for local resident companies and 37.5% for foreign registered companies and their branches in Kenya with regard to income derived from Kenya.
2. Shareholders in a company have limited liability and the veil of incorporation protects shareholders from liabilities in the company’s name.
3. Annual returns must be filed and so must any material changes in the company’s capital, directorship, registered address and shareholding.
4. A company in Kenya can be wound up voluntarily by shareholders or members or by operation of a court order.
5. There are various rules relating to requirements on companies preparing annual audited financial statements, but generally small companies with a turnover of less than KES 50M in a year are exempt from those particular provisions under the Companies Act.
Procedure to Incorporate a Company in Kenya
A person intending to set up a company (promoter) may be local or foreign; additionally, there is no stipulation under the Companies Act on minimum local shareholding (although there may be on a sectoral basis e.g., telecommunications companies.)
A foreigner has the option to incorporate either:
1. a local Kenyan company; or
2. the local branch of a foreign company that is already incorporated in a foreign jurisdiction.
The promoter may also be required to obtain a letter of no objection from the relevant regulatory authorities prior to incorporating a company to operate in specific industries e.g., a microfinance company shall need a letter of no objection from the Central Bank of Kenya before the Registrar of Companies will incorporate a company to carry out microfinance business.
Minimum requirements for a private company to be incorporated in Kenya
There must be:
1. a minimum of 1 shareholder;
2. a minimum of 1 director;
3. a stated share capital;
4. a registered address in Kenya;
5. the names and contact details of the ultimate beneficial owners – who are natural persons, (required under the Companies (Beneficial Ownership Information) Regulations, 2020);
6. a choice on whether the company shall be a public or private company; and
7. a choice on whether the company is to be limited by shares or by guarantee.
Application Forms and the Information to be Availed Prior to Incorporation
The requisite documents and information to be availed to the Registrar of Companies at the time of incorporating a company are:
1. Memorandum of association including statements on whether the company is to be limited by shares or by guarantee and whether it shall be a public or private company;
2. Articles of association;
3. Forms for registration – including:
i. Form CR1- Application for Registration Form
ii. Form CR2- Model Memorandum of Association
iii. Form CR6- Notice of Appointment of Directors and Particulars
iv. Form CR8- Notice of Residential Address of Directors
v. Statement of Nominal Capital
vi. Statement on the proposed officers of the company (directors and secretaries) and their written consent to act as such.
The Process of Company Registration in Kenya
The lawyer will prepare the requisite documents and forms which are filed with the Registrar of Companies and the turn-around time is 1 week from lodging the application for registration. Upon incorporation, the company shall be issued with a certificate of incorporation indicating that the company is duly incorporated under the Companies Act and outlining the company’s name, registration number and date of incorporation.
Registration as a Taxpayer - Company Pin Certificate
After incorporating the company, you need to set up a Taxpayer Pin Number for the incorporated company.
This is easily done by a Kenyan citizen with a tax pin certificate; but when it comes to companies set up by foreigners without a Kenyan co-director or company secretary; the procedural way for such a foreigner to get a tax pin number and subsequently obtain a pin certificate for their company is to obtain an investor/work permit to work in Kenya and then they will be eligible to apply to the Kenya Revenue Authority for a Tax Pin Number for the company.
It is unlawful for an incorporated company to run its business without duly registering as a tax payer.
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