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:
   • 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.
   • 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:
   • 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. 
   • 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. 
   • 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 publication is meant for general information only and does not create an advocate-client relationship between any reader and Mboya Wangong’u & Waiyaki Advocates. For particular expert advice on any matter dealt with above, please contact us.