Businesses in Kenya may now have to execute documents on computers. President Uhuru Kenyatta has finally signed the Business Law (Amendment) Bill, 2009 into law. The law has amended the Kenya Information and Communication Act to allow electronic authentication and signing of documents.
“Where any law provides that information or any other matter shall be authenticated by affixing a signature or that any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in that law, such requirement shall be deemed to have been satisfied if such information is authenticated by means of an advanced electronic signature affixed in such manner as may be prescribed by the Minister,” reads part of the new law.
What The New Business Law Amendment Means for Startups and Businesses In Kenya
- a) Companies Act, 2015 The new business law amends the Kenya ‘s Companies Act, 2015 as follows:
- Elimination of the requirement of affixing a company seal in the execution of company documents, contracts and deeds. By the terms of this new law, a document, contract or deed will be considered to be validly executed by a company if it is signed on behalf of the company by two authorised signatories or by a director of the company in the presence of a witness who attests the signature. This is a welcome amendment which reflects modern-day practice in developed jurisdictions.
- Abolition of the use of bearer shares. Bearer shares are unregistered equity securities owned by the possessor of the physical share documents. Their use worldwide has dwindled because they incur increased costs and are convenient instruments to secure funding for terrorism and other criminal activities. The Companies Act, 2015 prohibits the issuance of bearer shares. However, bearer shares that had been issued under the previous law would now be converted into registered shares within 9 months of the law coming into effect.
- Raising of the applicable threshold for ‘squeezing in’ and ‘selling out’ of shares in a company to at least 90 percent of the shares of the company. The Companies Act, 2015 had previously been amended in 2019 to reduce the threshold from 90 percent to 50 percent which was a major blow to the protection of minority shareholders’ rights. This is a welcome amendment as it seeks to protect the rights of minority shareholders against majority shareholders who might want to compulsorily acquire the shares of the minority shareholders.
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2. b) The Land Registration Act, 2012 The new Business law also amends Kenya ‘s Land Registration Act as follows:
- Abolition of the requirement to obtain any consent that may be required from the national government or county government in respect of leasehold properties. This will go a long way in reducing the time, cost and expenses incurred while obtaining the consents from the national government or county governments.
- Abolition of the requirement to produce a land rent clearance certificate and a land rates clearance certificate before the Land Registrar can effect registration of an instrument of transfer of land. By the terms of the law, it is now upon a purchaser to ensure that the vendor of the property has paid all the land rates and land rent in respect of the property as the Land Registrar will not demand proof of payment of land rates and land rent in order to register a transfer in respect of a property.
- Provision for the use of electronic signatures in the execution of documents processed under the Land Registration Act and gives the Registrar powers to maintain the Principal Land Registry in Nairobi and the Coast Registry in Mombasa in both physical and electronic forms.
3. c) The Insolvency Act, 2015 The law also amends the Insolvency Act as follows:
- Entrenchment of creditors’ protection by giving them the right to request for information from an insolvency practitioner in respect of a company that has been placed under administration. The insolvency practitioner is obliged to provide the information requested within 5 days or such other number of days agreed between the insolvency practitioner and the creditor.
- Provision for additional factors that a Court may consider in lifting a moratorium for a company under administration. The law provides that a Court shall take into consideration the perishability of a movable asset and whether or not the movable asset is being used to maintain the company as a going concern before lifting the moratorium on legal processes.
Electronic Signatures
- By the terms of the law, businesses and entrepreneurs in Kenya can now register their organizations online based on the new requirements of the Business Registration and Registration of Documents Acts.
- The law also means that the government will establish digital registries in Nairobi and Mombasa. The registrar has the option to offer searchable digital databases of registered businesses for the public.
- The law also permits parties that conduct business to sign contracts electronically.
- Operations such as land purchases will now be made easier because stamp processing can now be done through electronic means by the terms of the new law.
- Furthermore, the transfer of properties and securities can now be conducted digitally.
- However, title deeds and legal wills will still require physical signatures for them to be valid in case of a dispute.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer who has advised startups across Africa on issues such as startup funding (Venture Capital, Debt financing, private equity, angel investing etc), taxation, strategies, etc. He also has special focus on the protection of business or brands’ intellectual property rights ( such as trademark, patent or design) across Africa and other foreign jurisdictions.
He is well versed on issues of ESG (sustainability), media and entertainment law, corporate finance and governance.
He is also an award-winning writer.
He could be contacted at udohrapulu@gmail.com