Business Laws in Kenya.
Any organization or enterprise that engages in commercial, industrial, professional activities is usually described as a business. Therefore business entails the organized efforts and actions by an individual in the production and sale of goods and services at a sure profit. The various business activities include production, retailing, distribution, transportation, financing, insurance, whole selling, and consultation services in multiple departments (Ghemawat 2017). Laws are defined as the various rules and regulations recognized by any country or community as the governing laws among the residents and within which the government may enforce through the imposition of penalties. Business law is therefore defined as the segment of the law that governs business and commerce. It is also referred to as regulatory rules instituted in the contracts, hiring practice, and manufacturing, as well as the sale of consumer goods. Business laws in every nation are vital as they maintain order in the business, provide the mechanisms for dispute solution, establish the industry’s accepted standards and governing authorities, and protect the rights and liberties concerning other companies (Ghemawat 2017). In Kenya, the parliament and county assemblies enact the registration covering the various aspects of the business. The business amendment act of 2020 was passed primarily to ease the business environment by digitizing transactions by reducing formalities and documents required to finalize a transaction, hence reducing the cost of starting businesses in Kenya.
The law had been championed since 2015, with several changes arising from various amendments made to the business law. In the execution of company contracts, documents, or deeds, the requirement of affixing a company seal or official seal was abolished.
Kellett (2020) attest the amendments of the definition of the sign to the advanced electronic signature that uniquely links to the signatory, capable of identifying the signatory, anything that is created in a manner that may maintain under the sole control of the company and anything linked to the data which it relates to any subsequent change to the data. Therefore, the contract amendment’s net impact was the validation of the contacts signed under the modern advanced electronic signature.
Company Act Amendment
The company act amendment was designed to ratify the company’s previous provision to use its seal, which is official and commonly used to seal contracts and execute documents and deeds. The law documented as companies act no. 17 of 2015 was amended by the parliament to provide for the company documents or contracts to be executed by a company if signed on behalf of the organization by any two authorized signatories or through the company’s Director in the presence of witnesses law attest the signatures. Under the company amendment act, bearer shares have been converted to registered shares. The bearer shares are defined as the equity securities which have not been listed in any share register. Still, the ownership is vested on individuals who have physical possession of the company’s share warrant. Therefore, the company amendment act of 18th march 2020 stipulates that the holder of bearer share cannot freely exercise the rights attached to a bearer share unless the bearer is converted to a registered percentage. Therefore, the activities’ provisions are designed to recognize and protect the bearer’s rights as companies that will not alter with bearer shares to registered shares within nine months since the law’s enactment will have committed an offense and liable to conviction.
Insolvency Act Amendment
The insolvency act amendment is classified as a moratorium, which is the temporary suspension of activity until future consideration warrants lifting the rest have been resolved after the administrator or court’s approval. The insolvency act documented as no. 18 of 2015 regulates the insolvency proceeding with regards to both natural and legal individuals in addition to unincorporated bodies. Before lifting a moratorium in insolvency, the court had previously been instructed to consider the statutory purpose of administration, the impact of the approval on the applicant, especially if the applicant is likely to suffer any loss and the legitimate interest of the applicant and on the creditors of the company, providing for the rights of priority to the proprietary part of the applicant (Wanjagi and Ondabu 2018). As per the amendment, some preferences have been outlined in the act to include; if the value of the Secured Creditor’s claims exceeds the value of an encumbered asset, if the provision of protection to the secured creditor is likely to be burdened to the estate of the company and also if the relief is required to reconsider the value of the of perishable assets.
The Survey Amendment Act
The survey amendment act was designed with the introduction of the amendment of the signature system to include the advanced electronic signature and signature, which in a way, mirror the new definitions inserted into the law of contact. In connection to affixing the seal of Kenya’s survey, the amendment law stipulates the recognition of an imprint of the seal of Kenya’s study to any document or plan processed electronically and have security features (Emongor et al. 2020). Amendment of section 30(1) of the survey act allows for the electronic submission of all plans, field notes, and computations to the survey Director after surveying following the show’s laid procedures and stipulations (Wanjagi and Ondabu 2018). The interpretation of the law, therefore, has translated to seal of the survey to be processed electronically, optimizing the execution of documents digitally, allowed the freedom of authentication of the documents electronically as well as allowing the privilege of conducting the survey process electronically for all parties that are in demand of such services. This has opened up the ease of setting up a business in Kenya as all the verifications will be automated, including the survey process (Emongor et al. 2020).
The Land Registration Act
In Kenya, it is compulsory to register land mainly, which was affected in 1998. The land registration act of 2002 was structured to pave the way for the mandatory future introduction of electronic conveying, especially if using the electronic signatures to transfer and register the property as it happened following the adoption of the advanced electronic signature, which followed the adoption of the same law in the department of lands (Wanjagi and Ondabu 2018). According to this act, one is no longer required to produce a land rate clearance certificate and land rent clearance certificate to affect the land property (Kellett 2020). This act has thus been of significant impact, especially to the prospective investors in Kenya. They would require to buy land for setting up the business as the landowners are exempted from incurring the expense of obtaining clearance certificates. Therefore this eliminates the barriers which hindered the expeditious land dealings and the general land developments.
Excise Duty Act Amendment
As a country strains to stand out and grow its economies, it encourages exports rather than imports. Therefore to discourage the vast influx of importance to the nations, excise duty is imposed on imported goods. The excise duty is passed on indirectly to the consumer by the merchant or producer as the production cost and, therefore, translates to higher consumer cost. The exclusion of the excise duty on the imported glass bottle for pharmaceutical products packaging has translated to the pharmaceutical companies’ growth since the production cost is lowered. Investment deduction and the exemption of vast importation of materials designated for Standard Gauge Railway raw materials and market protection have favored the business setting in the country (Alden 2018). The construction of bulk storage handling facilities imported for the construction of various economic fueling means as the Standard Gauge Railway helps reduce the investment of the capital expenditure for the project. This has created options for the transportation of goods and also improved the infrastructure for the consumer. This has favored the country’s investment as many investors are finding the environment conducive to setting up with accessible and useful infrastructure (Wanjagi and Ondabu 2018). The project’s net benefit is thus directly pointed to the local growth of business within the country.
National Construction Authority Amendment
The national construction has been amended to enforce the building code. The law had previously expressed a conflict in interest, especially between the county governments and the national construction authority. Alden (2018) argue that the act addressed the battle with the National Construction authority being instituted to enforce the building code compliance. The county government has been tasked with approving the building plans, issuance of construction permits, and ensuring compliance with the working conditions provisions. The division of the roles has led to the smooth accountability of functions with the county governments assisting in the construction works’ supervision at the county level. However, this has translated to higher construction expenses, although it helps to ensure buildings’ quality and standards under construction (Emongor et al. 2020). The national construction authority’s regular inspection wins investors’ trust who will be confident of quality buildings that are available within the prospective investment country. This is because the accusation of poor artistry, negligence, and recklessness are ruled out.
Minority Shareholders Amendment Act
The law stipulated before the miscellaneous amendment act of 2019 that an offer should acquire or unconditionally contracted to be able to receive the 90% shares and 90% of the voting rights within the company in which the request relates to being able to buy out of the minority shareholders (Wanjagi and Ondabu 2018). The amendment has, however, lowered the threshold to 50%. However, this law has been criticized by the investors and analysts as it undermines the minority shareholders’ rights of a company in declining a takeover, hence challenging out the confidence of the investor in capital markets (Emongor et al. 2020). However, this act’s provisions have been repealed to raise the takeover threshold to 90% as a method of regaining the minority shareholders’ protection from compulsory sell-out by the majority shareholders in the named company.
Occupational Safety and Health Act
When signed into law in 2007, the law provided for the compulsory obtaining of a certificate of registration through the office of the Director of occupation safety and health concern before venturing into any business premises. The amended outlined the law with the inclusion of new –subclasses 44(11) and (12), which have translated to the exemption of the workless with less than 100 employees from registration under the act (Alden 2018). As stipulated in this law, the exemption is up to employees’ limitation to registration requirements by the cabinet secretary while responsible for labor matters. However, the exemption period is limited to one year, increasing the peaceful environment for starting the business as one is not entitled to such tax for one year.
The insolvency act
The parliament passed the enactment of the insolvency act to amend and consolidate the legislation in relation to the insolvency of both incorporated and unincorporated in addition to the natural persons. As passed, it provides for and regulates the bankruptcy of liquidation of the persons mentioned in the act, hence enabling the management of their affairs to benefit their creditors (Mabe, 2019). This act, as stipulated, aims at redeeming insolvent companies through administration rather than liquidation. The act is advantageous to the individuals venturing in business that is insolvent natural persons, unincorporated entities, and insolvent corporate bodies with the financial position which is redeemable to continue in their operation as going concerns so as they may be able to meet their financial obligations in the satisfaction of the corporate creditors. According to Mabe (2019), the lending institutions, therefore, are normally at the forefront of the bankruptcy and liquidation process since the majority have interests as secured creditors.
The registration of documents act
Since 2013, when the concept of digitization of lands and companies registries was introduced in Kenya, business ventures have been eased. Section 9 of the land registration act 2012 has provided the registrar of lands the mandate of maintaining the register and any document required in a secure, accessible, and reliable format, including the electronic files (Wily, 2018). However, section 10 of the act emphasizes the accessibility of the register by members through electronic means. By digitizing documents, document disappearance, and long periods of service delivery, he bottlenecked in service delivery and failed file tracking systems. The development of a tracking system ensures efficient allocation of settlements, reducing the period to retrieve settlement plots. The automation of the registration of documents involves creating a document management system tasked with all approved physical development plans within the country hence reducing the time required to vet and verify the plans submitted to the various county and national physical planners (Wily, 2018). Therefore, setting up a business in Kenya is becoming easy since it is easy to submit and get the verification done quickly and, consequently, provide security for all submitted documents.
The Stamp Duty Act
The Kenya National Treasury and Planning, through the cabinet secretary in 2020, published the stamp duty involving the regulations in the valuation of the immovable property in the country as means of easing the order of doing business. There have been private valuers’ appointments by the chief government valuer in Kenya, with the appointment being only in application to the chief government valuer by the private valuer (Wily, 2018). Through this appointment of the private valuer, the private sector is sure of their rights being represented in the private sector market reports’ valuation, especially during the transfer of documents during the assets and property transfer. The online mode of transmission of documents, even in the transfer of the legal documents, will ensure the accountability of the documents and ensure that all tax is collected. The exemption of the stamp duty in the transfer of shares in a company has been a relief in the investment into the various companies, ensuring the ease of investing in Kenya (Wily, 2018).
Ultimately, there are the governing laws formulated and passed in the government for every forum involving society in the business world. These regulations are collectively defined as business laws. These laws maintain order and conduct of business across all the parties involved within the industry and provide dispute resolution mechanisms. The business bill signed in direction with documentation of 2020 comes along with various propositions that are highly encouraging for the start of business in Kenya. Some laws include the repeal of the definition of advanced electronic signature, which paved the way for the approval of digital signature mechanisms with its signal for application in lands and surveys. Through amendments, it was signed into law. Some of the other business amendment bills formulated since 2015 include the insolvency act, occupation health and safety act, contract amendment acts, and excise duty act, which are promoting the pharmaceutical industries through tax exemptions. The digitization of documents even in the private sector has ensured easy verification and accountability. Insolvency amendment act, which provides information by creditors and stamps duty collection online, is all designed to attract the ease of starting a business in Kenya.
Alden Wily, L. (2018). The Community Land Act in Kenya Opportunities and Challenges for Communities. Land, vol. 7, no. 1, pp. 12.
Emongor, E., Musau, S., & Mwasiaji, E. (2020). Non-Interest Income and Insolvency Risk of Commercial Banks in Kenya. Journal of Finance and Accounting, vol. 4, no.5, pp. 41-54.
Ghemawat, P. (2017). The laws of globalization and business applications. Cambridge University Press.
Kellett, P. (2020). Securing High Levels of Business Compliance with Environmental Laws: What Works and What to Avoid. Journal of Environmental Law, vol. 32, no. 2, pp. 179-194.
Mabe, Ζ. (2019). Alternatives to bankruptcy in South Africa that provides for a discharge of debts: lessons from Kenya. PER: Potchefstroomse Elektroniese Regsblad, vol. 22, no. 1, pp. 1-34.
Wanjagi, J. A., & Ondabu, I. T. (2018). The Role of Taxation in Achieving Income and Wealth Equality in Kenya. American Journal of Economics, vol. 8, no. 5, pp. 213-220.
Wily, L. A. (2018). The community land act in Kenya opportunities and challenges for communities. Land, vol. 7, no. 12, pp. 1-25.