Choosing the type of company

When setting up a private company, you may choose either a company limited by shares or limited by guarantee. The company limited by shares is suited to commercial enterprises such as those buying or selling goods or services or otherwise engaged in any type of business for profit or income earning and the company limited by guarantee is better suited to non-profit organisations e.g. charitable organisations or foundations dedicated to serving a cause.

A company limited by guarantee takes longer to set up as the founders are thoroughly vetted during the incorporation process. The type of activities which for companies limited guarantee are incorporated are often done for the benefit of the public.

The company may be a local resident company or the branch of a foreign company. A local resident company means a company resident and incorporated in Kenya while a branch is a branch of a company that is registered abroad/outside of Kenya.

The choice of a branch of a foreign company versus local resident company is usually informed by tax considerations and level of business operations in Kenya. For instance, a branch has a higher tax rate than a local resident company in terms of corporation tax. At the time of writing this article corporation tax for a local resident company is 30% vis a vis 37.5% for a foreign branch.

Choosing the name

It is mandatory to provide 5 names when submitting the company registration application.

An official search can be conducted prior to the application for registration to give you an idea if the names you intend are likely to be accepted by the Companies Registry or not; or alternatively, you can find out at the time of registration if the names you have chosen are available for registration.

A name will likely be unavailable for registration if it is too similar to a name existing on the register of companies and business names held by the Companies Registry.

Provide 5 potential names for your company in the order of priority and the top available name in your list of 5 names is what shall be assigned as your company name.

The Registrar of Companies may reject prohibited names e.g. vulgar names or names prohibited under the Companies Act such as names suggesting a connection with the State or a government body.

In certain cases, you may need to obtain the consent of regulatory bodies before approval of the company name e.g. the consent of the Central Bank of Kenya for financial services companies.

Once you file your application for registration of the company, your top chosen name is reserved for your use for a period as the application for registration or incorporation of the company is processed.

Nominal capital

Each company must state its nominal capital in a signed statement of nominal capital form at the time of submitting the documents for company registration.

Except for specified regulated entities, the nominal capital is not stipulated under law, thus for instance an adequate nominal capital may be Kshs. 100,000 consisting of 1000 shares of value Kshs 100 each.

Some regulated companies have statutory capital amounts required to be stated at the time of incorporation; for instance, companies in the financial services industry or the capital markets. It is important to review the relevant statutes for these types of regulated companies prior to incorporation.

The nominal capital can later be increased at any time as the company may desire through an application filed by a qualified company secretary.

Shareholders

Generally, setting up an unregulated company in Kenya requires a minimum of 1 shareholder and this shareholder may be foreign or local. The shareholder(s) may also be individual or corporate. There is no mandatory requirement to have a local shareholder for your company except in specified regulated companies e.g. certain companies regulated by the Communications Authority of Kenya.

It is a common misconception that you need a local shareholder to register your company, however as illustrated above this is only required in specified regulated industries.

The company will need to set out both individual and corporate shareholders.

Indicate the class of shares that each shareholder holds. Thus, shares may be ordinary shares meaning no special rights attach to the shares or preferential shares that have special rights (that are not granted to the ordinary class of shares.)

Shareholders will provide their passport copies, passport sized photos, residential address, postal address, details of their nationality, date of birth, occupation, email and phone details during the incorporation.

If the company being incorporated is a subsidiary of another company, the corporate shareholder will additionally provide the incorporation documents from their original country of registration as well as details of directors and ultimate beneficial owners of the said body corporate shareholder. A subsidiary means that the local Kenyan Company has a shareholder that is another company whether in Kenya or abroad.

The list of shareholders shall be availed to the registry at the time of incorporation and this is termed the register of members of the company that is incorporated.

Directors

Statutorily, for unregulated companies, they require a minimum of 1 director who may be local or foreign, however in practical terms, when it comes to companies with one foreign director, such a company at inception usually requires a local director for purposes of obtaining company taxpayer registration. This is due to the reason that administratively; the taxpayer registration of a company is administratively linked to the personal tax number of the local director- the local director can be a Kenyan citizen or a foreigner with a valid work permit. Subsequently the company may choose to retain only one foreign director and appoint a company secretary to be filing the annual returns.

Directors will provide their passport copies, passport sized photos, residential address, postal address, details of their nationality, date of birth, occupation, email and phone details during the incorporation

Regulated companies have stipulations on the number of directors set out in their relevant statutory laws. Further advice can be provided upon consultation depending on the regulated industry.

A director in Kenya must have attained 18 years to be validly appointed.

A company must have at least 1 director who is a natural person and may have body corporate directors.

It is up to the company to decide if the terms of the director’s appointment will be written into a director’s service agreement to provide a comprehensive memorandum in writing of the director’s rights and responsibilities.

This can include the term of the director’s appointment, the mode of their removal, the signing power of the director, scope of participation in operations, the director’s remuneration. It is notable that the director’s service agreement must comply with the terms of the Articles of association and avoid discrepancy as this can expose the company to legal action where actions taken against the director are incongruent with either the service agreement or the Articles of Association.

The company can also have a board charter that comprehensively advises the Board of its exact legal responsibilities under the Kenya Companies Act. This is an internal document that can be approved by the board once the company is duly incorporated.

Local Representative

This is only a mandatory requirement for branches of company’s set up in Kenya. This is an individual resident in Kenya appointed to be the company’s local representative and their Kenyan address must be provided.

Local registered address

Every company requires a local physical and postal address. Companies can be assisted to get this by the lawyer incorporating the company.

Mandatory requirement to have either a local director, contact person who is a permanent resident in Kenya or a company secretary

A company in Kenya shall need to have any of the foregoing persons (either a local director, contact person who is a permanent resident in Kenya or a company secretary.

A company secretary is versed in compliance in company law and provides a wide scope of support to the company depending on the scope of their duties as set out in their engagement. Koya and Company Advocates has a practising company secretary with a valid license available to support clients.

The company secretary provides their particulars including their registration number and address as well as contact details.

Ultimate beneficial owners

Every company must state all their ultimate beneficial owners at the time of incorporation, who is an individual owning shareholding of 10% or more of the company. Where there is a corporate shareholder of the company being incorporated in Kenya, also provide details of the ultimate beneficial owners of said corporate shareholder. Ultimate beneficial owners will provide their passport copies, residential address, details of their nationality, date of birth, occupation, email and phone details during the incorporation.

Articles of Association

A company must have articles of association and you can either rely on the articles under the Companies Act or draft your own articles of association. If the company will rely on its drafted articles of association, these articles of association must be availed to the Companies Registry at the time of incorporation.

It is advisable to have a company secretary or lawyer draft the articles so the Articles of Association are in compliance with Kenyan Company Law.

Articles of association contain the rules of how the company, its board and shareholders shall operate including: how decisions are made by the board e.g. type of majority to vote on decisions for instance ordinary, special resolution. The articles can specify any restrictions on transfer of shares e.g. approval of other shareholders prior to sale of shares. The articles also specify rights of shareholders and matters on which they must vote on. The articles can specify what happens when a director or shareholder is mentally incapacitated as to not be able to take decisions among many other provisions. Koya & Co. Advocates has a practicing Company Secretary to further advice on articles of association.

The Main Stages for Company Registration in Kenya

1. The basic statutory forms to be signed and filed prior to incorporation and their content are as follows:
   1. • CR 1 form contains the names and ID or Passport numbers, nationality contact details and signatures of directors.
      • CR 2 form contains the names, address, occupation and signatures of shares and describes the number and class of shares whether ordinary or preference taken up by shareholders.
      • CR 8 form contains the residential address of the directors including country, city, street and house number.
      • Statement of nominal Capital states the nominal amount of capital and states if this is divided into how many shares and the Kenya shilling value of each share.
      • BOF1 form states who the individual beneficial owners (who are natural persons/humans) are together with their residential and postal address, their phone number and email address, occupation and the type of control over the company e.g. if direct or indirect.
2. Note that other forms may be filed at the time of company registration depending on certain choices that the company makes during incorporation e.g. if they appoint a company secretary, file the CR 10 form.
3. Once the statutory forms for registration of the company have been duly signed by shareholders, directors and the lawyer and subsequently filed by the lawyer alongside the requisite information e.g. passports of directors and their passport photos, the Companies Registry may revert as follows:
4. If the application for registration of the company has no issues, the Companies’ Registry will issue the certificate of incorporation which contains the name, registration number and registration date of the company and the CR 12 document which is the written record summarising the shareholders and their holdings, the directors and their postal addresses, the address of the company and the company name and company registration number.
5. If the Companies Registry has further queries, it may request additional documents or seek clarification from the lawyer and once this is correctly availed, the application will be processed and subsequently the registration documents duly availed by the Companies Registry. Alternatively, the Companies Registry may ask for corrections and once this is duly done by the lawyer, the registration certificate and CR 12 will be provided.
6. On average the company registration process can be done within 2 weeks and can take longer if the registry has many queries on the application.
7. At the time of writing this article, the government fee for registration of a company is approx. USD 110 and is subject to statutory adjustment.

Tax payer registration of the company

This is done after the company is set up and the company is issued with a tax pin certificate with its tax number. This document contains the name and contact details of the registered company, its tax number and the nature of its tax obligations e.g. corporate income tax.

Bank Account Set up for Companies in Kenya

This takes on average between 2 days to 1 month and this is dependent on the degree of follow up the bank may require when you initially apply for registration. Ordinarily the bank requires wet ink signature application forms to set up the corporate bank account and not scans and these can be couriered to Kenya. Also documents from abroad must be validly notarised by a notary public.

Additional forms may be required where signatories come from specified countries e.g., FATCA forms for signatories and shareholders/directors from the USA.

Basic information the bank usually requires aside from the signed bank application forms includes: passport copies notarized, photos of persons related to the company, proof of foreign addresses, registration documents of any parent companies; board resolution authorizing corporate bank account set up, letter confirming address etc.