When the Companies Act was passed, companies were only required to keep a register of their members as by provided by section 93. In 2019, section 93 of the Companies Act was amended by inserting section 93A requiring the mandatory keeping of a register of “the beneficial owners of companies.”

The amendment directed that all companies must keep a register containing details of it’s beneficial owners. Subsequently, the Companies (Beneficial Ownership Information) Regulations, 2020 (herein after “the regulations”) were enacted to give effect to section 93 A of the Companies Act.

Failure to comply with Section 93A of the Act

If a company fails to comply with a requirement of section 93A, the company & each officer of the company in default, commit an offence and on conviction are each liable to a fine not exceeding Kshs 500,000/=. Additionally, if after conviction the company continues to fail to comply, the company and each officer of the company who is in default, commit a further offence on each day and on conviction are each liable to a fine not exceeding fifty thousand shillings for each such offence.

Who is a beneficial owner?

A beneficial owner is defined in the Companies Act and, in the Regulations, as “the natural person who ultimately owns or controls a legal person or arrangements or a natural person on whose behalf transactions are conducted, and include persons who exercise ultimate effective control over a legal person or arrangement.”

Regulation 3 further outlines the conditions qualifying the beneficial owner to include one who; holds at least 10% of the issued shares in the company either directly or indirectly; exercises at least 10% of the voting rights in the company either directly or indirectly; holds a right, directly or indirectly, to appoint or remove a director of the company; exercises significant influence or control, directly or indirectly over the company.

Contents of the Beneficial Owners Register.

Regulation 3 provides that companies must take reasonable steps to identify the beneficial owners and enter the following details into the register; full name, birth certificate number; ID number, passport number, nationality, date of birth, postal address, business address, residential address, telephone number, email address, occupation or profession, nature of ownership or control, the date the person became the beneficial owner, the date the person ceases to be a beneficial owner and any other information that may be required by the registrar from time to time.

Obtaining the information.

The information on the beneficial owner is obtained from either the beneficial owner themselves, an official register or provided by a third party not directly related to the beneficial owner.

Guidelines on lodgement with the registrar of companies.

A copy of the company’s register containing the details above, must be lodged by the company with the registrar of company within 30 days after completing its preparation. This is to be done by filling form BOF1 set out in the First Schedule of the regulations.  The register is to be lodged on behalf of the company by a director, the certified secretary or an advocate.

In case of change, a company shall lodge with the registrar the particulars of change via Form BOF2 also set out in the first schedule and pay the prescribed fees.

In case a beneficial owner ceases to be one, the company must file a notice to that effect to the registrar to that via Form BOF3 and pay the prescribed fees.

Duties of the company

Since it is the company’s duty to keep a register and submit the contents to the registrar, it is obligated to investigate and obtain the particulars of beneficial owners when they are not readily available and/or provided. To get the information, the company is required to give a 21-day notice to the known or suspected beneficial owner requesting for the information. If the beneficial owner fails to provide the information, the company then issues them with warning notice requiring them to submit the information, the date of compliance, a statement proposing to impose a restriction and an explanation of the effect of the restriction.

If after fourteen days the person does not also comply with the warning notice, the company then goes ahead restricts the relevant interest of that person.  They are to make a note if the of that restriction in company’s register. They are also required to inform the person affected by the restriction in writing.

The effect of the restriction is, no transfer of the interest, no rights are exercisable in respect to the interest, no shares may be issued in right of the interest, no payment of sums due from the company in respect of the interest.

If the beneficial owner complies with the notice, the company is to withdraw the restriction and make an entry of the same in the register.

Failure to identify beneficial owner.

Where a company fails to identify a beneficial owner, it shall note in its register that it knows or has reasonable cause to believe that there is a beneficial owner in relation to the company but it has not identified the beneficial owner or his particulars, has issued a warning notice which has not been complied with, has issued a restriction notice, there is a matter before court in relation to beneficial ownership

Prohibition on disclosure of the information

No-one is allowed to disclose the information of any beneficial owner. Doing so is commission an offence and a person will be liable, upon conviction, to a fine not exceeding 20,000/ or imprisonment not exceeding six months or both.

Exceptions.

The beneficial owner’s information may only be disclosed with his/her written consent. The registrar may use that information to communicate with the beneficial owner. The information may also be made available to the Attorney General, any criminal investigation agency authority, & law enforcement agencies that monitor the financial sector including KRA upon a written request.

Conclusion.

Section 93 A and the regulations giving effect to it are mandatory. All companies must ensure that they take steps to ensure compliance so as not to be slapped with the punitive monetary fines.

N.B - The beneficial owners e-register has been operational since 13^th October 2020; all registered companies are required to submit the information via Form B0F1 by 31^st January 2021, failure to which the fine under section 93A of the Act applies.