The Business Laws (Amendment) Act 2020 (the “Act”) was assented to by the President on March 18,
2020. The Act has amended several laws with the aim of facilitating the ease of doing business in the
country. The World Bank, through annual surveys that investigate the laws and regulations that either
enhance or constrain business activity in various counties, ranks nearly 190 worldwide. The report
usually covers several areas which include starting a business, registering property, enforcing
contracts, among others.
In its 2020 Ease of Doing Business Report, the World Bank ranked Kenya at position 56 out of 190
countries surveyed. With this ranking, Kenya’s economy is among the most attractive business
environments on the continent. However, the country continues to grapple with several challenges
that hinder investment and impact negatively on its rankings.
In a bid to improve its ranking even further, the Act was passed to ease the signing and authentication
of legal documents and to introduce other changes to business laws in Kenya. We set out below a
summary of the changes introduced by the Act om various laws in Kenya:
1. Law of Contracts Act (Cap 23) – Signing of contracts can now be done by way of digital signatures.
This means that contracts executed by the parties electronically will now be deemed to be valid.2. Registration of Documents Act (Cap 285) – All documents registrable under the Act may now be
filed either physically or electronically. To facilitate electronic filing, the Principal Registrar has
been empowered to establish and maintain the Principal and Coast registries in electronic form.
3. Income Tax Act (Cap 470) [Second Schedule Part V] – Investors who incur capital expenditure of
at least 5 billion on construction of bulk storage and handling facilities for supporting the SGR
operations shall enjoy an investment deduction at a rate of 150% of the capital expenditure for the
year of income in which the bulk storage facilities were first commenced or used. The tax incentive
only applies to facilities with a storage capacity of at least 100,000 metric tonnes.
4. Land Registration Act, 2012 – Changes have been introduced under the Land Registration Act are
as follows:
(i) The rates and rent clearance certificates will no longer be a prerequisite for registration of
instruments of transfer or lease. It is now upon the purchaser to ensure that that the land rent
and land rates in respect of the property have fully been paid by the vendor.
(ii) Electronic execution of documents – Instruments processed and executed by persons
consenting to it by way of digital signature or an electronic signature shall be deemed to be
valid.
5. Stamp Duty Act (Cap 480) – Amended to recognize electronic stamping of documents by the
Kenya Revenue Authority.
6. The Companies Act, 2015 – The following are some of the changes introduced under the Act:
(i) The requirement of affixing a company seal in the execution of company documents, contracts
and deeds has be repealed. Therefore, a document, contract or deed signed on behalf of the
company by two authorized signatories or by a director of the company in the presence of a
witness will be considered as validly executed by a company.
(ii) Where a bearer share is in issue, companies are now required to convert the same into a
registered share and to notify the Registrar of the conversion within 30 days. Failure to comply
with this within 9 months of coming into operation of the Act is an offence.
(iii) The threshold for ‘squeezing in’ and ‘selling out’ of shares in a company has been raised to
90%. The Statute Law Miscellaneous Amendment Act, 2019 had lowered the threshold to at
least 50% (from 90%) of the shares of the company. This amendment is a relief to minority
shareholders against majority shareholders exercise of compulsorily acquisition of shares of
the minority.
7. Insolvency Act, 2015 – Creditors of a company now have the right to request for information from
an insolvency practitioner who is obliged to provide the information requested within 5 days or
such other number of days agreed between the insolvency practitioner and the creditor. This
amendment is meant to protect the creditor’s interest by granting them timely access and up-to-
date information on the company’s affairs.
In the spirit of going digital, the changes introduced by the Act are welcome. Businesses will greatly
benefit from these changes as the costs and time spent on transactions will be reduced significantly.
Concerns have however been raised as to the potential of for the changes to be abused through forgery
of electronic signatures especially in contracts for disposition of interests in land. It is hoped that these
issues will be addressed as the laws are implemented. The amendments will also enhance the
efficiency at the various government registries as most filings including stamping can now be done
through electronic means.
Article by Audrey, Grace and Lovin
This Article is for Information purposes only.
