Category: LexBytes

Parental Responsibility over children to vest equally in both parents in proposed changes to the law – The Children (Amendment) Bill, 2020 (“Bill”) seeks to amend the Children Act (“Act”) by vesting equal responsibility for parental care and protection of a child in both parents of that child. Further, the Bill provides that neither the father nor mother of the child shall have a superior right or claim against the other in the exercise of such parental responsibility. In the proposed changes, the provisions of the Act that vested parental responsibility in the mother at the first instance, and allowed the father to acquire parental responsibility later have been repealed. Consequently, it will be mandatory for parents, whether married to each other or not, to have equal parental responsibility over their child. The proposed amendments are in line with Article 53(1) of the Constitution of Kenya, 2010 which provides that both parents to a child have equal responsibility to provide for and protect that child.

The Ministry of Lands and Physical Planning on 16th July, 2021 issued a new Gazette Notice No. 7146, revoking the previous Gazette Notice Numbers 11348 of 2020, and 520, 1706 and 1707 of 2021. These Notices had previously indicated the properties to be affected by the conversion process. The new Notice also includes a new list of all the properties affected by conversion, and provides that persons affected may lodge an objection within 90 days from the date of publication of the Notice, which is accessible here. Landowners are therefore encouraged to confirm whether their properties are affected, and lodge any complaints, within the prescribed 90 days.

The Finance Act, 2021, has introduced several changes to the Excise Duty Act (“the Act”). It is now a requirement for the gazette notices on partial or whole grants of remission of excise duty in respect of beer or wine made from agricultural products to be tabled in the National Assembly for approval or annulment, prior to their issuance by the Cabinet Secretary. Further, where excise duty has been paid for internet data services by a licensed person who purchased the data in bulk for resale, the Act has introduced a provision for the offsetting of excise duty payable by that person on internet data services supplied to the final consumer. The Act has also introduced excise duty on imported pasta, imported eggs, imported onions, imported potatoes, potato crisps, and potato chips, and locally manufactured chocolates. Additionally, excise duty at the rate of 7.5% has been introduced on betting, gaming, lotteries, and price competition. The Act also provides that the fees and commissions earned in respect to loans are now subject to excise duty, and the excise duty payable for telephone and internet data has been increased to 20% from 15%.

The Finance Act, 2021, published on 30th June, 2021, has introduced tax exemptions for registered family trusts by making amendments to various tax laws including the Income Tax Act and the Stamp Duty Act. The Income Tax Act now incorporates several exemptions that apply to registered family trusts. For instance, property that is transferred or sold for the purpose of transferring title or transferring the proceeds of such sale into a registered family trust is now exempted from income tax. Further, the income or principal sum of a registered family trust and any capital gains relating to the transfer of title of immovable property to a registered family trust, is also exempted from income tax. Additionally, the Stamp Duty Act now exempts a conveyance or transfer, or an agreement for a conveyance or transfer, in favour of a registered family trust from payment of stamp duty. A registered family trust is further exempted from stamp duty as is the case for a will, codicil or other testamentary disposition. These benefits serve as an attempt to encourage more people to plan their personal estates using registered family trusts in order to enjoy the tax incentives provided by the law.

Share buyback is the process where a company repurchases its own shares from its existing shareholders. Companies buy back their own shares for various reasons. The process of share buybacks in Kenya is regulated by the Companies Act, which generally restricts share buyback but provides exceptions where a company may be allowed to do so pursuant to its compliance with certain requirements. Some of the requirements that must be met for a share buyback to be valid include: (a) only fully paid-up shares can be repurchased; and (b) the repurchase should be financed by distributable profits or proceeds from a fresh issue of shares. Financing of the repurchase from the capital of the company is allowed but under very stringent requirements. Although provided under our laws, share buybacks are not common in Kenya. Nation Media Group is currently involved in the country’s first ever share buyback through the Nairobi Securities Exchange. It is likely that more companies will consider this option in the future.

With the increasing statutory requirements for companies in Kenya including the requirement to update Beneficial Ownership Registers, most shareholders with dormant companies are looking to dissolve their companies to avoid the risks of non-compliance. The infamous mode of dissolving a company is liquidation, as it is most commonly known. However, another mode that is available for dormant companies is strike off. Strike off is the process where a company that has been inactive for a long time and that has few or no obligations is removed from the register of companies. The effect of this removal is that the company ceases to exist and it can no longer trade in its name. This effectively means that it will also not be liable to meet any statutory requirements relating to companies. Strike off is also less costly compared to liquidation where the company has to incur the cost of an insolvency practitioner. However, there are certain requirements that companies need to meet to qualify for strike off.

Conversion of Titles: What Land Owners should understand about the Process – Conversion is the statutory process of migrating all parcels of land from repealed land registration statutes to a unitary regime under the current Land Registration Act, No. 3 of 2012. The titles issued under the repealed statutes will be cancelled and replaced with new titles under the new regime. However, the ownership of the properties, the parcel size and the interest conferred should not be affected by this conversion process, and land owners have a right to object to the conversion process if any of the new details are inconsistent with the details in their current title. The process of conversion includes the publication of a notice by the Ministry of Lands and Physical Planning providing a list of all the properties to be affected by the conversion process. The Gazette Notice should also state the ‘old’ Land Reference Numbers, the new Parcel Numbers and the size of the properties. Owners of the affected properties would then have 90 days from the date of the notice to lodge any complaints regarding the conversion. The Ministry has already issued a number of notices and the objection periods for these have already lapsed. More Gazette Notices are expected to be issued. Land owners are therefore encouraged to confirm whether their properties are affected, and lodge any complaints, within the prescribed timelines.

A Free Trade Agreement (FTA) is an agreement between two or more countries to facilitate trade and eliminate trade barriers. On 6th February 2020, the United States and Kenya announced the launch of negotiations to conclude a comprehensive and reciprocal FTA that would be the first of its kind between the United States and a sub-Saharan African country. The FTA is intended to cover various areas, including goods market access, technical barriers to trade, agriculture, industry, digital trade and investment, and intellectual property.

The Nairobi Securities Exchange (NSE) launched the Ibuka program in late 2018 with the aim of preparing micro, small and medium-sized companies (MSMEs) for listing on the NSE. The 10-month program is designed to host companies, ideally MSMEs, on two non-trading boards, that is, the Incubator Board and the Accelerator Board. The program also seeks to promote growth and development of Kenyan MSMEs by providing them with access to financial advisors and consultants to assist the companies structure their

businesses, enhance their visibility/brand recognition, develop their capability to access the capital markets and get exposure to local and international investors. The Ibuka Program has helped MSMEs attract financing for expansion which they would not have been able to access otherwise because most investors and financiers consider MSMEs risky ventures. At least 18 companies have joined the Ibuka Program including Safaricom Investment Cooperative, Rentco East Africa Limited and Mookh Africa. Ultimately, the goal of the Ibuka Program is to increase the number of companies listed on the NSE.

Deadline for Updating Beneficial Ownership Registers – Companies were given an extension of up to 31st July 2021 to update their Beneficial Ownership Registers. Companies are advised to urgently prepare and submit a register of their beneficial owners or face the consequences for non-compliance. The Beneficial Ownership Register was introduced by the Companies Act 2015 and the Companies (Beneficial Ownership Information) Regulations 2020. The said Act and Regulations make it an offence for a company, and every officer of that company, to fail to comply with this requirement. Directors of a company risk being fined up to Kshs. 500,000/= each if they fail to update the company’s beneficial ownership register within the stipulated time that lapses on 31st July 2021.