More than half of the 794,741 companies registered in Kenya face the risk of delisting due to their failure to disclose the identities of secret shareholders who control more than 10% of the companies’ shares.
As of last week, 50.28 percent or 399,595 registered businesses had not disclosed details, including names, phone numbers and residential addresses, of beneficial owners to the Attorney General through the Business Registration Service (BRS).
Companies must disclose secret shareholders by November 30 or risk deregistration.
Details required for filing include the names of the major shareholder, Kenya Revenue Authority (KRA) Personal Identification Number (PIN), national ID card or passport copies, postal address, residential address, occupation, telephone number, and the date on which the investor became a beneficial owner.
Most high net worth shareholders on the Nairobi Stock Exchange (NSE) own shares through nominee accounts, with the list of top 10 shareholders in the majority of major companies dominated by anonymous investors.
Joyce Koech, Registrar of Companies, told Asharq Al-Awsat: “49.72% of private limited companies complied with the requirements to submit a copy of their beneficial ownership register.” Daily chores In emailed responses last week.
“As of October 24, 2024, the total number of private limited companies registered in our entity index is 794,741, and they are actively monitored for compliance. While the number of limited liability companies registered in our entity index is 3,988.
The new regulations prevent companies from publishing personal details of beneficial owners, but open the window for the KRA, security agencies and the Financial Reporting Center to profit from the information.
This is an indication of the state’s keenness to use information to track down money launderers, corrupt people, and tax evaders through data.
The burden of providing details to the state falls on the companies, which are subject to a fine of Sh500,000 and a penalty of Sh50,000 for each day of violation.
Companies have been empowered by regulations to stop paying dividends, prevent share transfers and withdraw board appointment rights as well as voting power for large investors who fail to provide their details to be sent to the state.
The BRS opened the electronic register of beneficial ownership information on 13 October 2020, in line with new regulations requiring all companies registered under the Companies Act to prepare and submit copies of the register of beneficial ownership to the Registrar’s Office.
Private companies and limited liability companies are mandated to prepare and maintain a register of beneficial ownership at their registered offices/premises and to submit a copy thereof to the Registrar of Companies.
Limited liability companies are currently only required to prepare and maintain beneficial ownership information at their registered address, as submission of data to the Registrar has not yet begun in the absence of an electronic registry of partnerships.
The BRS wants all private limited companies to comply with disclosures by 30 November 2024, while compliance timelines for limited liability companies will be set after their e-registration link is activated.
Entities must also disclose changes in beneficial ownership information to the registrar within 14 days or face an administrative fine of Sh2,000.
The Registrar of Companies has attributed the modest compliance rates with disclosures to a combination of low levels of awareness and the prevalence of dormant entities.
“The level of awareness and concerns about potential legal ramifications are important reasons for non-compliance. In addition, some entities are dormant, but have not moved to notify the Registrar to delist and remove companies from the register.
“However, we are actively working to address these challenges through ongoing public education and outreach efforts. Promoting a clear understanding of these obligations is key to improving compliance rates.
The requirement to provide beneficial ownership information seeks to cover the risks of misuse of entities to facilitate criminal activity such as corruption, money laundering, terrorist financing and widespread tax evasion.
The government relies on disclosures to enhance the transparency of beneficial ownership in public procurement.
Procuring entities, including ministries and state departments, are obligated to upload awarded contracts containing beneficial ownership information to the Public Procurement Information Portal (PPIP).
This condition forms part of the conditions attached to the ongoing multi-year loan program between Kenya and the International Monetary Fund.
BRS says it has made interventions to incentivize disclosures by private companies and LLCs including simplifying the compliance process, providing a portal for disclosures through the eCitizen platform and zeroing the cost of filing.
In addition, BRS has shared step-by-step guides and tutorials on its platforms on how to provide useful property information.
“In line with our commitment to enhancing compliance, we are intensifying stakeholder engagement and public awareness campaigns. These efforts aim to ensure that all required entities meet their obligations and comply with them before the upcoming deadline,” Ms. Koech said.