27 April 2022 Kenya publishes additional regulations on beneficial ownership Through Legal Notice No. 32 of 2022, Kenya's Attorney General introduced new regulations on beneficial ownership by publishing the Companies (Beneficial Ownership Information) (Amendment) Regulations, 2022. The regulations introduce additional provisions regulating the disclosure of beneficial ownership information. On 5 July 2019, Kenya's Statute Law (Miscellaneous Amendments) Act, 2019, made amendments to the Companies Act, 2015, by introducing Section 93 A, which requires every company registered in Kenya to prepare and keep a register of its beneficial owners. This register discloses the personal information of the beneficial owners of a company, the nature of ownership or control they have in the company and the date they became or ceased to become beneficial owners. It further provides that a copy of the beneficial owners' register is to be filed with the Registrar of Companies within 30 days of its preparation or within 14 days following an amendment on the same. This provision was introduced with an aim of promoting transparency in the ownership structures of companies. To give effect to this amendment, the Attorney General published the Companies (Beneficial Ownership Information) Regulations, 2020 (the principal regulations) on 18 February 2020 which gave guidelines on, among others, the criteria for a person to qualify as a beneficial owner, the contents of the beneficial ownership register, the filing requirements with the registrar of companies and the restriction on disclosure of information contained in the beneficial owners register. The criteria for identifying beneficial owners have been extended to include persons who jointly meet all of the following conditions:
Initially, the reference was only to individual persons or companies. This means that where control is exercised by two or more persons jointly, each person shall be beneficial owners in equal measure. The amendments have expanded the scope of disclosure of beneficial ownership information by companies to permit disclosures to: (i) A procuring entity (public entity), where the company in question participates in public procurement and assets disposal under the Public Procurement and Asset Disposal Act, 2015. The procuring entities in this case refers to public bodies such as the National government, County government, Constituencies, the Judiciary and the courts, Commissions established under the Constitution, Independent Offices established under the Constitution, State corporations, the Central Bank of Kenya, Public schools and universities, a company owned by a public entity among other public bodies. (ii) A contracting authority, where the company participates in a public private partnership arrangement under the Public Private Partnership Act, 2013. The contracting authority in this case being a state department, agency, state corporation or county government which intends to have a function undertaken by it performed by a private party. Initially, the principal regulations only permitted disclosure to a competent authority, which term referred to the attorney general, any criminal investigation authority established by law, law enforcement agencies, and the financial sector regulators including the Kenya Revenue Authority and the Financial Reporting Centre. For the information to be disclosed to the procuring entity or contracting authority, the competent authority, Public Procurement Regulatory Authority (PPRA) or the Public Private Partnership Committee respectively must seek a written consent from the Registrar of Companies to request for such information from the company prior to requesting for the information. (iii) Disclosure to the public. The amendments have further given the Government authority to disclose beneficial ownership information of a company where such information affects the country. The BOF 1 Form has been updated to include a section for indicating the connection that a person with indirect ownership has with the company either. This can either be through appointment of a director or by holding shares on behalf of a beneficial owner. All companies that seek and apply for tenders from the Government and public bodies will now be required to disclose information pertaining to the beneficial owners when submitting their bid applications, as part of the required documents. This will play an important role in the verification process to ensure that the tenders are not awarded to restricted persons. Further, once a tender is awarded to a company by a procuring entity, the PPRA will publicize the beneficial ownership information of the company on their website and government portals. The regulations have been upped to promote transparency in awarding public contracts to companies in Kenya, where the respective public bodies would seek to know the ownership structures of companies before engaging them. While the intention of the Government is understandable, the publication of personal information of individual beneficial owners may create a real risk of breach of data privacy for the individuals, in contravention of the Data Protection Act, 2019 and constituent regulations. In as much as the amendments do not clearly stipulate/limit the amount of personal information that may be held by the PPRA, some of the information contained in the beneficial owner's register constitute sensitive personal data such as the financial investments in the company and residential address of the individuals. This is in addition to other personal information such as their name, nationality national identification number, telephone number, postal address, email address, business address and occupation. If publicized, this information has the potential to fall into unauthorized hands without the additional consent of the individual affected. Therefore, it is important for the procurement officers and directors of companies seeking government or public bodies tenders to ensure that they understand the risk associated with the disclosures, prior to submitting their bids. Again, the provision seems to contradict the confidentiality provisions under the Public Procurement and Asset Disposal Act which prohibit the disclosure of the contents of tenders, proposals or quotations during or after procurement proceedings. The amendments now make it mandatory for the PPRA to publish beneficial ownership information for successful companies that have been awarded a tender by the procuring entity as part of contract award in the Government Portal. This provision for publication calls for further deliberations on the extent of beneficial owner's information that may be published. All companies registered in Kenya should ensure that their beneficial owners register is correct and up to date. Failure to do so may result in significant fines of up to KES500,000, on conviction, and a continuing fine of KES50,000 per day for each day of non-compliance. Further, the company will risk disqualification from tender applications as this will soon become a prerequisite.
Document ID: 2022-0680 |
