Compliance Steps to Safeguard Your Company

In light of the recent directive mandating compliance with Beneficial Ownership disclosure rules, company directors and owners must promptly undertake the following actions to satisfy legal requirements under Kenyan law:

📌 1. Identify Non‑Compliant Status
 Consult the official list of non‑compliant companies published by the Business Registration Service (BRS).

If your company appears, formally notify the Registrar of Companies in writing confirming whether the entity remains active and operational.

📌 2. Maintain & File a Beneficial Ownership Register

Under Section 93A of the Companies Act 2015 and Section 31B of the Limited Liability Partnerships Act, your company or LLP must identify individuals with significant control (e.g., ≥10% shares or voting rights, power to appoint/remove directors, or significant influence).

Compile a register of beneficial owners containing:

·       Full legal names, identification (ID, passport, birth certificate), KRA PIN, nationality, date of birth;

·       Postal, business, residential addresses, contact details, occupation/profession,

·       Nature of ownership/control, date became/ceased to be beneficial owner.

Prioritize verification and validation of these details, and lodge the completed register with the Registrar within 30 days of preparing it.

📌 3. Promptly Report Changes

Any amendments (e.g., new or ceased beneficial owners) **must be submitted within 14 days for private entities (30 days for public companies).

📌 4. Submit Outstanding Documents

Furnish any missing filings requested by the Registrar, including contracts, annual returns, trade licenses, and financial statements covering the last five (5) years or more.

🛡️ Key Legal Provisions & Penalties

1. Companies Act 2015 & BO Regulations 2020 (effective Feb 28, 2020):

·       Section 93A mandates maintaining a BO register; failure to lodge within 30 days constitutes an offense.

·       BO defined as persons with ≥10% shares or voting rights, appointment/removal rights, or significant influence.

·       BO register must be submitted and updated as specified.

2. Limited Liability Partnerships Act & BO Regulations 2023:

Section 31B requires LLPs to maintain and lodge a BO register with detailed particulars, including identifying dates of status changes. ( Read the Act).

3. Penalties:

• Late initial filing: fine up to KES 500,000 for the company and each officer, plus daily fines of KES 50,000 until compliance.
• Late updates: administrative fine of KES 2,000 plus KES 100 per day of default for each responsible party.
• Unauthorized disclosure** of BO information incurs a fine up to KES 20,000 or up to six months imprisonment (or both) See from The Companies (Beneficial Ownership Information) Regulations
• Continued non‑compliance—such as failure to file for five (5) years—may lead to deregistration under Section 894 (Companies Act) or Section 33A (LLP Act).

Ensuring compliance with these regulations will help your company avoid substantial fines, possible deregistration, and legal sanction—while enhancing transparency in line with Kenya’s Anti‑Money Laundering and Counter‑Terrorism Financing (AML‑CTF) obligations.

 

 

⚖️ Kenyan Legal Framework & Case Law on remittance of withheld tax by an appointed agent

Scenario: Here’s what Kenyan case law and KRA practice say about whether a tenant (payor) is liable for withholding tax when the landlord’s tax agent fails to remit to KRA:

⚖️ Kenyan Legal Framework & Case Law

A. Commissioner of Domestic Taxes v Githima Ltd (Income Tax Appeal E047 of 2022, 2023 KEHC 26190)

• Equity Bank withheld VAT on behalf of its landlord but failed to remit the full amount to KRA.
• The High Court clarified that withholding agents remain liable for remittance under Section 42A(4B) of the Income Tax Act—failure to remit by the statutory deadline constitutes an offence (Full Case).
• Importantly, even though the tenant deducted the tax, the liability to ensure proper remittance lies with the tenant as the appointed agent.
• Also, the landlord cannot be held liable merely because the agent withheld but did not remit.

B. Dianga v Commissioner of Domestic Taxes (Tax Appeal Tribunal, 2023 KETAT 508)

• Equity Bank deducted VAT but was later compelled to remit and register the landlord for VAT.
• The Tribunal reaffirmed that deduction alone is insufficient—without remittance, the withholding agent (tenant) cannot discharge its obligation (Read More).

 

🧾 Statutory Position

• Section 42A(1–4B) (Income Tax Act / TPA): once appointed, the agent must deduct and remit within five working days. Failure to do so is an offence, and liability remains with the agent—not the landlord .
• A deduction by itself does not satisfy the obligation: proof of remittance is essential.

 

✍️ Implications

1.      Tenant liability: If appointed as withholding agent, the tenant is legally responsible for any failure to remit tax after deduction.

2.      Recovery from tenant: KRA can pursue the tenant directly for unpaid withholding (e.g., VAT or income tax on rent), regardless of any internal arrangement with the landlord.

3.      Tenant defences: Without credible evidence of remittance (e.g., KRA receipts, iTax confirmations), the tenant cannot use their deduction as a defence.

4.      Landlord protection: A tenant's failure to remit does not shift liability to the landlord; the tenant remains the one in breach.

 

✅ Conclusion

Yes—the tenant is primarily liable for any non-remitted withheld tax once they deduct it as an appointed agent.
The tenant’s obligation is deduct → remit (within statutory time). Failure to remit constitutes an offence and leads to direct liability under Kenyan tax law.
The landlord may claim credit or proof of remittance, but it is not their burden to make KRA whole for the tenant’s default.

Legal Review: You cannot sue the insurance company directly/Insurance Claims

In cases involving a fatal road accident, the correct party to sue in your pleadings depends on the legal framework and jurisdiction, but generally, you sue the insured (the driver or vehicle owner) — not the insurance company directly.

✅ Who to Sue

You typically sue the insured person (usually the driver and/or vehicle owner) who is allegedly at fault for the accident.

⚖️ Why Not the Insurance Company Directly?

• In most jurisdictions, including Kenya, you cannot sue the insurance company directly in a personal injury or fatal accident claim.
• This is because the insurance company’s obligation arises only after liability is established against their insured under third-party insurance.
• The insurance will indemnify the insured if the court finds them liable, subject to the policy terms.

✅ Legal Framework in Kenya

1. Traffic Act (Cap. 403)

• Regulates the operation of motor vehicles and licensing in Kenya.
• Establishes responsibilities of vehicle owners and drivers.

2. Insurance (Motor Vehicles Third Party Risks) Act (Cap. 405)

Under the Act:

• The insurer's role is to satisfy judgments against their insured for liabilities covered by the policy (Section 10).
• The claimant must first obtain judgment against the insured.
• Requires motor vehicle owners to have third-party insurance.
• Section 10 provides that an insurer is liable to indemnify the insured once judgment has been obtained against the insured.

✅ Proper Party to Sue

In a fatal accident:

• The estate of the deceased, usually represented by the legal representative (e.g. administrator or executor of the estate), files a civil suit under the:
• Fatal Accidents Act (Cap. 32): for loss of dependency to the family.
• Law Reform Act (Cap. 26): for pain and suffering, loss of expectation of life.
• The defendants in the suit are typically:
• The driver (if not the owner).
• The owner of the motor vehicle (vicarious liability may apply).

✅ The insurance company is not sued directly, but it will defend the suit on behalf of the insured and pay any judgment as per the insurance policy.

 

✅ When Can You Involve the Insurance Company?

Under Section 10 of Cap. 405, the insurer is obligated to satisfy the judgment only after:

1.        A judgment has been obtained against the insured (driver/owner).

2.        The judgment has not been satisfied by the insured.

3.        The insurance policy was valid at the time of the accident.

➡️ You cannot sue the insurance company directly, unless in rare cases like a declaratory suit to compel the insurer to satisfy a judgment.

📝 Pleading Structure

In your pleadings:

• The defendant(s) should be the driver/owner of the vehicle.
• If both are different people (e.g., employer and driver), you can sue them jointly — vicarious liability may arise.
• You may also need a limited grant of letters of administration ad litem if you're filing on behalf of the deceased’s estate.

📝 Example: Proper Pleading Structure

Plaintiff: Administrator of the estate of [Deceased Name]
Defendant(s): [Driver Name] and/or [Vehicle Owner Name]

Cause of Action: Negligence resulting in fatal injuries

Reliefs Sought:

• General damages (Loss of dependency, pain and suffering, etc.)
• Special damages (e.g., funeral expenses)
• Costs of the suit
• Interest

🔎 Key Case Law

• Kenindia Assurance Co Ltd v Otiende (1989) KLR – Clarified that insurers are not to be sued directly under Cap. 405.
• Rose Mmboga v African Banking Corp & Another [2015] eKLR – Reiterated the requirement to sue the tortfeasor and not the insurer.

✔️ What You Can Do After Judgment

After winning the case:

• You can serve the judgment on the insurance company.
• They are legally bound to pay if the judgment falls within the scope of the policy.

🛑 Exception: Direct Action Against Insurer?

In some rare cases, where there's statutory provision or insurance contracts allow, a direct suit against the insurer might be permitted — but not typical in fatal accident claims in Kenya. 

Legal Advice:

It is highly recommended to seek legal advice from a personal injury attorney who can guide you through the process and ensure you are suing the correct parties and pursuing the appropriate claims. Contact us through the "Contact Form" on this website. 

 

The typical Conveyancing Process in Kenya

The conveyancing process refers to the legal steps involved in transferring property ownership from one party to another. In Kenya, this process is meticulously governed by various laws, primarily the Land Act, 2012, and the Land Registration Act, 2012, among others. It's crucial for both buyers and sellers to engage qualified conveyancing advocates to ensure a smooth, legal, and secure transfer.

Breakdown of the typical conveyancing process in Kenya:

Phase 1: Pre-Contract / Due Diligence Stage

This is the investigative phase where the buyer (and their advocate) carries out thorough checks on the property and the seller.

1. Instruction of Advocates: Both the seller and buyer instruct their respective conveyancing advocates. It's highly recommended that each party has independent legal representation to avoid conflicts of interest.
2. Preliminary Searches by Buyer's Advocate: The buyer's advocate conducts various searches to verify the property's legal status and identify any potential issues. These include:
• Land Registry Search: This is the most crucial search. It verifies the seller's ownership, confirms the property details (size, registration number), and checks for any encumbrances (e.g., mortgages, charges, cautions, restrictions, court orders). An official search provides certified copies of the title register.
• Local Authority Searches: To check for outstanding land rates, planning restrictions, or any arrears with the county government. A Rates Clearance Certificate will be required later.
• Land Rent Clearance Certificate (for leasehold properties): To confirm that all annual land rent payable to the government is settled.
• Company Searches (if applicable): If the seller is a company, a search at the Registrar of Companies verifies its legal existence, directorship, and capacity to sell.
• Physical Inspection: The buyer's advocate often advises the buyer to conduct a physical inspection of the property to confirm its condition, boundaries, and occupancy status (e.g., if it's tenanted, the terms of the tenancy).
• Verification of Identity: The advocates verify the identity documents (ID/Passport, KRA PIN) of both the seller and buyer to prevent fraud and comply with Anti-Money Laundering (AML) regulations.
3. Obtaining Title Documents & Information from Seller: The seller's advocate obtains the original title deed (or certified copies) and provides other relevant documents and information about the property to the buyer's advocate. This may include:
• Seller's KRA PIN.
• Spousal consent (if applicable, for matrimonial property).
• Any existing mortgage details (redemption statement from the bank).
• Details of any existing tenants.

Phase 2: Contracts Stage

This phase involves drafting, negotiating, and signing the legally binding sale agreement.

1. Drafting of Sale Agreement: The seller's advocate usually drafts the Sale Agreement (also known as the Offer Letter or Letter of Intent). This document outlines the key terms and conditions of the sale, including:
• Full details of the seller and buyer.
• Full description of the property (including title number).
• Purchase price and payment schedule (e.g., deposit, installment payments, final payment).
• Completion date.
• Conditions precedent (e.g., buyer securing financing, due diligence satisfaction).
• Responsibilities for costs (e.g., legal fees, stamp duty, Capital Gains Tax).
• Consequences of default by either party.
2. Review and Negotiation of Sale Agreement: The buyer's advocate meticulously reviews the draft Sale Agreement to ensure it protects their client's interests and accurately reflects the agreed terms. Any discrepancies or additional clauses are negotiated between the advocates until both parties are satisfied.
3. Payment of Deposit and Execution of Sale Agreement:
• Once both parties agree on the terms, the buyer pays an agreed deposit (typically 10% of the purchase price in Kenya). This deposit is usually held by the seller's advocate in a joint client/stakeholder account, or by a neutral third-party stakeholder, until the completion of the transaction.
• Both the seller and buyer (and their witnesses) then sign the Sale Agreement, making it legally binding.
4. Application for Consents (if applicable):
• Land Control Board (LCB) Consent: For transactions involving agricultural land, obtaining consent from the relevant Land Control Board is mandatory. Without this consent, the transaction is void.
• Lessor's Consent (for leasehold properties): If the property is leasehold, consent from the lessor (e.g., County Government, National Government, or a private entity) might be required before transfer.
• Management Company Consent (for apartments/sectional properties): Consent from the management company or developer may be required, especially to ensure all service charges are paid up.

Phase 3: Completion / Post-Contract Stage

This is the final phase where the legal ownership is officially transferred.

1. Payment of Balances: The buyer's advocate ensures that the buyer has remitted the remaining balance of the purchase price. If the buyer is taking a mortgage, the lender will release the loan funds to the buyer's advocate.
2. Obtaining Clearance Certificates: The seller's advocate obtains:
• Land Rates Clearance Certificate: From the respective County Government, confirming no outstanding rates.
• Land Rent Clearance Certificate: From the Commissioner of Lands (for leasehold properties), confirming no outstanding land rent.
• Redemption Statement: From the seller's bank if there's an existing mortgage, indicating the amount required to discharge the charge. This amount is usually paid directly from the sale proceeds.
3. Preparation and Execution of Transfer Documents:
• The seller's advocate prepares the Transfer Form (or Deed of Assignment for leasehold), which is the official document that legally transfers ownership.
• Both the seller and buyer (and their witnesses) sign the Transfer Form.
• Other accompanying documents include copies of ID/Passports, KRA PIN certificates, and passport-sized photos for both parties.
4. Valuation for Stamp Duty: The property is valued by the Government Valuer for the purpose of calculating Stamp Duty. Stamp Duty is a tax paid by the buyer to the government for the transfer of property. The amount is usually 4% of the value for property within a municipality and 2% for property outside.
5. Payment of Stamp Duty: The buyer's advocate ensures the Stamp Duty is paid to the Kenya Revenue Authority (KRA). This is a critical step, as the transfer cannot be registered without proof of stamp duty payment.
6. Lodging for Registration: Once all documents are in order, the transfer documents, original title deed, clearance certificates, and proof of stamp duty payment are lodged at the relevant Land Registry for registration of the new owner.
7. Registration of Transfer: The Land Registry processes the application. Once satisfied, the Registrar registers the transfer, cancelling the old title and issuing a new one in the buyer's name. This is the point at which legal ownership officially changes hands.
8. Release of Funds: Upon confirmation of successful registration and issuance of the new title deed in the buyer's name, the balance of the purchase price (held in the stakeholder account) is released to the seller.
9. Post-Registration:
• Capital Gains Tax (CGT) Payment: The seller's advocate withholds the Capital Gains Tax (currently 15% of the net gain) from the sale proceeds and remits it to KRA.
• Handover of Property: The seller officially hands over possession of the property and keys to the buyer.
• Utilities Transfer: The buyer's advocate advises on changing utility accounts (water, electricity) into the new owner's name.
• Delivery of Documents: The buyer receives the original title deed, the registered transfer form, and all other completion documents.

The conveyancing process, while seemingly linear, can be complex and sometimes experience delays due to various factors, including bureaucratic processes at land registries or issues arising during due diligence. This is why having experienced conveyancing advocates is paramount to a successful and legally sound property transaction.

Reach out to our Advocates by dropping your details at the "Comment" Section. 

 

Key Factors to Consider when buying Property in Kenya/Tips For Advising Clients In The Current Real Estate Market

When advising a client on purchasing property, key considerations include their financial situation, the property's suitability for their needs, location, potential for future value appreciation, and legal and contractual aspects. A thorough understanding of the client's requirements, market conditions, and the property's specifics is crucial for a successful transaction. 

Review and Discussion:

1. Financial Factors:

• Budget:

Determine the client's maximum affordable purchase price, including not just the property price but also associated costs like stamp duty, legal fees, and potential renovation expenses. 

• Financing:

Explore mortgage options, pre-approval processes, and the client's ability to secure a loan. 

• Ongoing Costs:

Factor in mortgage repayments, property taxes, insurance, and maintenance expenses. 

• Investment Potential:

If it's an investment property, assess rental income potential and long-term appreciation. 

2. Property-Related Factors:

• Property Type:

Residential (house, apartment, etc.) or commercial (office, retail, etc.). 

• Location:

Proximity to work, schools, amenities, transportation, and the overall desirability of the area. 

• Property Condition:

Assess the need for repairs, renovations, or potential issues like structural problems or pest infestations. 

• Future Development:

Investigate any planned infrastructure or development projects that might affect property value. 

• Legal Aspects:

Ensure clear title, address any easements or restrictions, and understand the terms of the purchase agreement. 

• Environmental Factors:

Consider potential environmental hazards like contamination or hazardous waste. 

• Market Conditions:

Understand whether it's a buyer's or seller's market and adjust strategies accordingly. 

3. Client-Specific Factors:

• Needs and Goals:

Understand the client's specific requirements, lifestyle, and long-term plans for the property. 

• Risk Tolerance:

Assess the client's willingness to accept potential risks associated with property ownership. 

• Future Plans:

Consider the client's future needs, such as potential for expansion or downsizing. 

4. Legal and Contractual Aspects:

• Review Contracts:

Carefully examine all legal documents, including the purchase agreement, title deeds, and any other relevant paperwork.

• Seek Legal Advice:

Recommend a reputable real estate lawyer to guide the client through the legal process and protect their interests. 

By carefully considering these factors, advisors can help clients make informed decisions and navigate the complexities of purchasing property with confidence.