Firms in Kenya are scrambling to comply with new regulations on shareholder records introduced in October 2020.
All firms are expected to update and submit beneficial ownership registers before January 31, 2021 to ensure compliance with the Companies Act.
The new rules made it mandatory for both private and public companies to submit details of their beneficial owners to the Registrar of Companies. To crack down on illicit wealth, companies are also expected to provide personal information of investors who own more than 10 per cent stake in the firms through secret accounts.
It established as a pre-requisite for new company registration submission of beneficial ownership registers. Existing firms, on the other hand, were given three months to comply.
Businesses who fail to comply with the new rules face a fine of Ksh500,000 and a daily penalty of Ksh50,000 for each day in breach.
Forms seen by Business Today require companies to fill out particulars of beneficial owners including full name, national ID number, personal identification number, nationality, date of birth, occupation, residential address, postal address and current phone number and email address.
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A beneficial owner is defined by the Companies Act as “the natural person who ultimately owns or controls a legal person or arrangements or the natural person on whose behalf a transaction is conducted, and includes those persons who exercise ultimate effective control over a legal person or arrangement”.
At the time of their introduction, the new rules were touted as a means of unmasking powerful figures who hide their identities behind trusts, proxies, law firms and foundations to avoid scrutiny.
It was also seen as a move to rein in insider trading, as it curbed the use of nominee accounts commonly used by investors in firms listed on the Nairobi Securities Exchange (NSE) to avoid ownership limits.
Previously, firms were expected to file a register of members or its owners, with date of share acquisition, share ownership and shareholder names including nominees.
This made it possible for companies to avoid naming controlling shareholders by hiding their interests.
With the new rules, ownership records will be made available to the Kenya Revenue Authority (KRA), law enforcement agencies and the Financial Reporting Centre.