Buying Land or Property in Kenya

Legal Process of Buying Property in Kenya

In Kenya, local and foreigners are permitted to buy commercial and residential real estate/lands located within a town or municipality without any restrictions whatsoever provided that comply with the laid down procedures.

However, for the agricultural land, foreigners or privately owned companies whose shareholders are not all Kenyan citizens  are not permitted to buy such land unless where such transaction has been exempted from the provisions of the Land Control  Act by president pursuant to section 24 thereof. The land control boards, which are established under the said Act,  are prohibited from granted consent to transfer in respect of persons or companies that do not qualify to hold agricultural land. 

Under the new Kenyan Constitution 2010, persons who are not citizen of Kenya as well as companies whose shareholders are not Kenyan Citizen can only own land on  leasehold basis for a term not exeeding 99 years.  In other words, such persons cannot own land on freehold tenure.

In summary, the procedure of buying land in Kenya is as detailed herein below.

N/B: It is extremely important for buyers to use professional and reputable lawyers whenever they are buying land in Kenya in order to  receive proper legal advise and representation in the entire sale process and thus avoid unnecessary pitfalls and dealing with cons. Equally important, the purchaser should avoid making any payment directly to the vendor or his agent, and such monies are better channeled through his lawyer so that he can take the requisite precautions.  

1. Identification of the Land

The process of land purchase starts with the buyer identifying a suitable land for purchase. One can enlist the services of a reputable real estate agency firm to assist him in identifying a suitable land for purchase and connect him to the seller.  Once the land has been identified, the buyer should endeavour to visit the site and satisfy himself or herself that the land meets the desired criteria including its physical location and boundaries.
2. Conducting the requisite searches and preliminary investigations

Land in Kenya is registered under three registration regimes viz:
The previous land registration laws (that is, The Government Lands Act, the Registration of Titles Act and  the Registered Lands Act) have now been repealed and replaced by the Land Act, the National Land Commission Land and the Land Registration Act. The Land Registration Act provide for registration unit at every district and the land registries established under the repealed laws are still operational. 
 The buyer or his lawyer should get a copy of title and National Indentity Card of the seller and conduct the requisite searches both for the land at the relevant lands office and also of the person named in the title as the registered owner at the Registration of Persons Bureau.   The latter will help to confirm that the purported owner of land is real owner of the land an impostor. 
To conduct a search, one is required to file a search application form and attached a copy of the title deed. The search is then required to be lodged at the registry and the requisite search fees (current at KShs. 500/- paid. It takes 2-3 days to get search results from the Lands registry. The search result should be able to reveal the following details:-
(i) the registered owner of the property;
(ii) its size;
(iii) any encumbrances registered against the titles like prohibitions, court orders, cautions and caveats;
If the search results are satisfactory,  once should also check whether the land is included on the Report by the Commission of Inquiry on the Illegal and Irregularly Allocated Land, commonly known as the Ndungu Land Report.
Moreover, it is usually prudent for the owner to enlist the services of a registered surveyor who shall be able to confirm the beacons on the land and conduct further preliminary checks at the Survey Department.  

3.   Price and terms negotiation and the sale Agreement 

If the the proposed buyer is satisfied by the preliminary investigation and check highlighted in 2 above, he should, together with his advocates, or alone, engage the vendor or his agent for purposes of discussion and agreeing on the terms of sale including the price and the terms of payment.  Usually, the buyer is require to pay 10% deposit  and the balance of the purchase price upon completion of the sale transaction.

Once the parties have agreed on the terms of sale, the Vendor's advocates should prepare the sale agreement and send the same to the vendor for his approval.

The sale agreement will set out the terms of sale including the name of the parties, the purchase price and mode of payment, the completion period (which is usually 90 days) and the completion documents to be furnish by the seller/ vendor to enable registration of the transfer of property in favour of the purchaser. Invariably, the sale agreement will incorporate the Law Society Conditions of Sale (1989 Version), which is a codification of the customary terms of sale adopted by the Law Society of Kenya, and these terms will apply, by reference,  to the agreement of the parties unless otherwise excluded or varied by the parties in their agreement.  It is also common for the sale agreement to incorporate a suitable arbitration clause, which provides for a mechanism of ease dispute resolution. 

Where the balance of purchase price is being financed by a bank or financier, the same should be stated in the sale agreement. In such a case, the transfer of land in favour of the purchaser and the charge over the property in favour of the financier are registered concomitantly, and once the original title and security documents have been forwarded to the financier by the financier's advocates, the financier shall settle the financed balance of the purchase price to the Vendor or his advocates.

 It is important to note that where the purchase is being financed in the payment of any part of the purchase price, any part of the purchase price that is not being financed musty be paid to the vendor's advocates and the purchase's advocates or the advocates acting for the financier must furnish the vendor's advocates with a suitable professional undertaking to secure the payment of the financed balance of the purchase price.  If such undertaking in satisfactory to the vendor's advocates, he should forward the requisite completion documents to the financier's advocates to undertake the stamping and registration formalities.

Once the terms of the sale agreement have been agreed between the parties, the agreement is engrossed and executed by the parties or their power of attorney.   The purchaser should be the first to sign the sale agreement, which should be forwarded to the vendor's advocates for the vendor's execution accompanied by the deposit cheque or evidence of the payment of the same. 

Once the vendor has executed, the vendor's advocates should note to presented it for stamping with duty (currently KShs. 200 for the original and KShs. 20 for each counterpart)  at the lands office. This is important because of the rule that unstamped documents cannot be accepted by a court of law as evidence in the event of a dispute.

It is important to note that the deposit monies should be held on stakeholders' terms  (as trustee) by the Vendor's advocates  pending the completion of the sale and should not been release to the vendor unless otherwise agreement by the parties.  Moreover, where the purchase price is paid in full, the same should be held on stakeholder's terms by the vendor's advocates until completion of the sale transaction, which is signified by the registration of the transfer at the lands office in favour of the purchaser.  For this reason, the purchaser must insist on the vendor's advocates being  reputable firm of advocates, and where the vendor's advocates cannot be trusted, the monies should be held in a joint account in the name of the vendor's and the purchaser's advocates or an independent escrow agent. 

4. Preparation of the Transfer and Getting the Completion Documents

The transfer is usually prepare by the purchaser’s advocate and approved the vendor’s advocate.The should also be signed by both parties.

Unless otherwise stated in the sale agreement between the parties, it is usually the vendor's duty to obtain all the requisite completion documents, which are required to effect the registration of the property in favour of the purchaser) at his own costs.  These documents include:-


(a) The original title for the property
(b) The transfer of property duly executed by the vendor/ seller (in triplicate);
(c) Identity Card/ Certificate of Registration of the vendor/ seller and Pin Certificate;
(d) Three(3) passport sized photographs of the seller/vendor. If the seller is a company, photographs of two of its director or a director and company secretary and their Pin Certificate will also be required;
(e) Land Rent Clearance Certificate for the Property, where the land is a leasehold from the Government;
(f) Rates Clearance Certificate for the Property issued by the relevant local authority (if applicable);
(g) original receipts evidencing the payment of rates and rates; 
(h)(h) Consent to transfer the property issued by the Commissioner of land, the relevant land control board or where the land is a leasehold from a local authority, the consent is issued by the Town Clerk of the relevant local authority.
(i)Valuation form duly completed by the Vendor or his advocate;

 If the property is a flat/apartment or office space, and comprised the in a lease, additional completion n documents will include:
(a) the original lease for the property and the transfer of lease duly executed by the parties, as appropriate;
(b) the consent by the  lessor and/or the management company, incorporated in the transfer of lease,  
(c) the letter from the management company confirming that the seller has paid all the outgoings;
(d) the original share certificate in the management company;
(e) the transfer of share form duly executed by the parties;
(f) Form D in respect of the share transfer duly signed by the company's auditors;

5. Stamping and Registration Formalities

The purchaser is usually responsible to cater for the costs of the stamp duty on the transfer of property  and registration charges.   The stamp duty on the transfer of property is collected by the Kenya Revenue Authority and is payable pursuant to the provisions of the Stamp Duty Act, chapter 480 of the laws of Kenya.  Before duty is determined, the vendor's advocates must apply for the valuation of the property at the Land Office, which is undertaken by the government valuers, who are required to determine the market value of the property.  This application is done by lodging the duly signed transfer of property and the valuation for stamp duty form duly signed by the vendor or his advocates (referred to above).

Once the valuation has been completed, the market value of the property (not necessarily the value indicated by the transfer) will be indicated on the original transfer of property by the collector of duties. Thereafter, the vendor's advocates will need to present the documents to the lands office for assessment of the duty payable.  This is one by filling a form known as the stamp duty Declaration, Assessment and Pay-in Slip, which hich is complicated in quadruplicate.

As stated before, the stamp duty is collected  by Kenya Revenue Authority and should be paid to the Commissioner of Domestic Taxes through various banks which have been appointed as collecting agents. Currently, these banks include Kenya Commercial bank Limited (KCB), National Bank of Kenya Limited (NBK).
 Once the duty has been paid over the counter through the collecting either of the collecting agent banks, the documents are then lodged at the lands office for stamping with duty. The collector of stamp duties will normally stamp the documents once he is satisfied that the collect amount of stamp duty has been paid.

The following are the rates applicable on transfer of land:-

• where land is in a municipality- the duty is 4% of the market value of the land as determined by the Government valuer. The market value may be higher that the value indicated by the parties in the transfer documents.

• where land is agricultural or outside a municipality- the duty is 2% of the market value of the land as determined by the Government valuer. 
• in respect of a charge or mortgage – the duty payable is 0.1% of the mortgage amount. 

Once the transfer of land or charge over the property has been stamp duty with duty, the transfer documents accompanied by the original titles, land rent and rates clearance certificate, consent to transfer, the duly completed valuation for stamp duty form, and the the stamp duty declaration, assessment and pay-in-slip should be booked of registration.

Where the purchaser is being financed, the charge over the property and consent to charge must also be booked or lodged for registration together with the transfer.

6. Registration 

The final process of land purchase is the registration of the transfer in favour of the purchaser, or the transfer of property/lease and the charge in favour of the purchaser and the financier, as the case may be.

Once the duly registered transfer has been released to the purchaser or his advocate, it is important to verify registration by conducting a search over the property.

Where the purchaser is being financed, the duly registered documents including the original title for the property, transfer and the charge are forwarded to the financier to enable its settle the balance of the purchase price. These will be held by the bank/financier until the loan has been repaid in full.

7. Development Permission 

Where the property is intended for use in construction or erection of a building, after the purchase, the owner will be require to obtain the requisite development permissions from the relevant local authority.

If the proposed development is likely to have any adverse impact on the environment, owner will also be required to commission an  environmental impact assessment report  and obtaining an environmental licence from the NEMA before undertaking any development on his property.

If you require any assistance in buying land or property in Kenya, please do not hesitate to contact the writer for a detailed legal advice  and/or legal representation via mainacy@gmail.com  

 
 

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Trademark Registration in Kenya

Trademark Registration in Kenya
In Kenya, a trademark or service marks can be registered with the Kenya Industrial Property Institute (KIPI), and in pursuant to the Kenyan Trade Marks Act (Cap. 506).
Requirements for completing and filing applications
In order to register the trademark in Kenya, you require the following:
a) The full name and address of the entity which will own the mark.
b) 12 black and white or coloured prints of the mark. It is best to register the mark in black and white so that the protection of the mark may be extended to any colour combination in which you may wish to use the mark.
c) A translation into English of all words in the mark which are in any other.
d) A signed form of authorisation in favour of our firm which authorises us to file and deal with the trademark application. The form of authorisation can be filed within a month of filing the application.
Examination procedures and time scales
The trademarks registry carries out substantive examinations of all trademark and service mark applications firstly to satisfy itself that the marks meet the requirements for registerability (i.e. they are distinctive enough to qualify for registration, they are not descriptive of the character and quality of the goods for which they will be registered and on which they will be used and they are not laudatory words or combinations of words) and secondly to ascertain whether there are any other registered marks or pending applications for marks which are identical or sufficiently similar to the mark applied for as to be likely to result in confusion or deception of the public.
The trademarks registry will usually provide the official filing date and number for an application within seven days of filing of the application. It can take up to 2 to 3 months for the registry to issue an initial examination report. It generally takes our trademarks registry 3 to 6 months to register trademarks or service marks.
Use of registered mark
Under section 29 of the Kenya Trade Marks Act, if a registered mark is not used commercially in Kenya for a continuous period of five years, a third party can apply successfully to have it cancelled from the Kenya register. Use of a registered mark by a registered user is however deemed to be use by the registered owner. Such use will be a good defence to any cancellation action taken under section 29 of the Kenya Trade Marks Act by a third party.
Renewal Fees
When a trademark is eventually registered, the registration is backdated to the date on which the application was filed. The initial period of protection is ten years from that date. Thereafter the registration is to be renewed for successive periods of ten years.
Reasons for Registering a Trademark
Valuable Asset - The most important reason to register your trademark is to preserve your rights in this valuable asset. In many countries of the world, even though you have created a trademark and are using the trademark, if you do not register that trademark, you have no rights in it. A third party can misappropriate "your" trademark and obtain ownership rights by registering before you do. Although there are many other countries, in addition to Kenya, which provide certain rights to mere trademark users, asserting trademark rights based on mere use of a trademark is expensive and time consuming, not to mention the fact that you may fail if your usage is not sufficiently notorious. Thus, a trademark registration is a valuable asset for use in asserting your trademark rights against other parties. Furthermore, since a trademark registration is viewed as an asset, it can be used to collateralize a loan or it can often be sold to a third party.

Fend Off Other Parties - Trademarks can be misappropriated innocently by coincidence, or intentionally, by competitors, distributors, or professional trademark pirates. Trademark pirates can learn about new and upcoming trademarks by attending trade shows and watching the media and thereafter seeking to register these trademarks in strategic foreign countries. They hope to sell these trademarks at a handsome profit to the companies which introduced the trademark. If you register first, you not only foil the trademark pirate, you also make it easier for other parties to determine that the trademark is already protected when they do a trademark search on a new trademark that they are considering using.
Prevent Trademark Dilution - Another important reason to register trademarks is to prevent what is known as "dilution". Dilution occurs when a number of companies use similar trademarks on similar goods. Potential purchasers are then exposed to numerous trademarks that have certain similarities as to these related goods, and this minimizes the legal and practical value of a trademark as a source identifier. Other companies are much less likely to adopt a trademark which is similar to or identical to your trademark if you have taken the necessary steps to register it. If you do not register your trademark, it is much more difficult for other parties to become aware of your interest in the trademark.
Potential Loss of Goodwill - Another danger is the loss of good will which can arise by an infringing product or service of poor quality. This can happen when someone else enters the marketplace and commences the sale of goods or services with the same or a similar mark. If those goods or services are of poor quality, purchasers may well associate the poor quality item with your company, resulting in your loss of good will and sales. However, this is less likely to occur if you register your trademarks, since many companies take steps to avoid infringing a trademark of which they are aware.
Defensive Registrations - Trademarks can also be registered in nearly all countries in the world outside the United States as a defensive measure. In those countries, a company or individual need not use its trademark prior to obtaining a registration. Therefore, even in potential markets, you can prevent a third party from registering or using a trademark if you are the first party to obtain a registration. By obtaining a registration in advance of your use, you can be virtually assured of the unfettered ability to exclusively use your trademark in that country provided you begin use before the registration is subject to cancellation for non use.
Licensing the Trademark - Another reason for registering trademarks is the monetary value of a trademark registration per se. Besides being a property right which can be sold or collateralized, a trademark can be licensed. Quite often, companies enjoy substantial revenue in royalties from licensing their trademarks. If a trademark is licensed, however, it is very important, not only to register the trademark, but also to record the license agreements, where possible. License agreements must be carefully drafted to assure quality control of the licensed products and/or services by the trademark owner. A trademark license should be reviewed by an attorney who is knowledgeable in these matters, since the improper drafting or enforcement of a license agreement or the failure to record a license agreement can result in the invalidity of the trademark.

Cyrus

 
 

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Establishment of a Charitable Foundation in Kenya

Establishment of a Charitable Foundation in Kenya
A charitable foundation under Kenyan laws can be established either as:
(a) a company limited by guarantee; or
(b) a charitable trust.
(A) Incorporation of company limited by guarantee
A company limited by guarantee under the Kenyan Companies Act can be incorporated either with or without share capital. However, in most cases companies limited by guarantees are incorporated without share capital. A company limited by guarantee may be a private company or a public company. A private company must have a minimum of 2 and a maximum of 50 members. On the other hand, a public company must have a minimum of 7 members but there is no statutorily prescribed maximum number of persons. Private companies enjoy a number of privileges including an exemption from the requirement to file annual accounts at the Companies Registry.
Although incorporation of a company limited by shares in Kenya is relatively straight-forward process, incorporation of charitable companies is a length process due to security verifications that are conducted against the promoters of such a company before incorporation.
Procedure of incorporation
A summary of the information required for the purposes of incorporation and the costs involved are set out below;
1. An application is made to reserve the proposed name with the Registrar. The Registrar has the right to reject names he considers undesirable or which are similar to the names of existing companies. It is therefore advisable to apply for 2 or 3 alternative names. The name must include the word “Limited”. However, this requirement can be dispensed in case of charitable companies (essentially companies limited by guarantee).
2. Preparation of the Memorandum and Articles of Association of the company.
The Memorandum sets out the objects of the company in detail. In the case of companies limited by guarantee, the Companies Act require the memorandum of association to state the minimum amount which each members guarantee to contribute to the assets of the companies in the event of liquidation and this amount is left at the discretion of the promoters. It is necessary to set out all the anticipated activities of the company as part of its main objects of association.
The Articles will contain the regulations for conducting the company’s affairs. It will be necessary to consider various matters including: the size of the board of directors, the quorum for meetings of members and directors, whether the directors are subject to retirement by rotation, any special rights conferred on members to appoint directors etc.
3. The Memorandum and Articles of a private charitable company must be signed by at least 2 persons who state the minimum amount they undertake to contribute in the event of liquidation of the company.
4. The Memorandum and Articles and a Statement of the Nominal Capital are then lodged for stamping with duty.
5. After stamping, the documents are presented to the Registrar of Companies together with the following prescribed forms:
(a) Particulars of the registered office. The full physical and postal address of the registered office must be supplied. This includes the land reference number.
(b) Particulars of the directors and company secretary including their full names, usual postal address, nationality and business occupation. It is usual to have a minimum of 2 directors. There are no unusual restrictions as to who may be appointed a director. In particular, there is no requirement that a director be a resident or citizen of Kenya. Companies may also act as directors.
(c) A Declaration of Compliance by the advocate attending to the incorporation of the company.
6. For companies limited by guarantee, the documents are usually forward to the Director of National Intelligence Service in order to carry out further investigation and inquiries on the objects of the proposed company. This process may take 2 to 3 months and if the National Intelligence Service approves the incorporation of the proposed company, these documents are sent back to the Registrar of Companies for incorporation.
7. Incorporation is complete when the Registrar issues a Certificate of Incorporation which must be displayed at the registered office. At this stage, the Attorney General will usually exempt the company from using the word “limited” as part of its name.
Post-incorporation
Common seal
The company will require a common seal for executing certain types of documents (e.g. office leases). Common seals are manufactured locally at a cost of approximately KShs.2,500 and we should be pleased to make the necessary arrangements.
Licences and other registrations
Most companies will require some form of government or local authority licence before commencing business depending upon the nature of the business. We should be pleased to provide specific advice on the licences which may be required. There will also be a number of tax registrations which must be attended to including:
• the obtaining of a PIN number
• various employee related tax registrations (Pay As You Earn, National Social Security Fund, National Hospital Insurance Fund and Local Authority Service Charge)
• value added tax (where appropriate)
Effects of Registration
Upon incorporation, the Foundation becomes a body corporate capable in its name of:
a) suing and being sued;
b) taking, purchasing or otherwise acquiring, holding, charging or disposing of movable and immovable property;
c) entering into contracts; and
d) doing or performing all such things or acts necessary for the proper performance of its functions.

(B) ADVICE ON INCORPORATION OF A FOUNDATION UNDER THE TRUSTEES (PERPETUAL SUCCESSION) ACT
Under the laws of Kenya, it is possible for a foundation to be incorporated under the Trustees (Perpetual Succession) Act (Chapter 164 of the Laws of Kenya). This Act in section 3(1) thereof provides that, “Trustees who have been appointed by anybody or association of persons established for any religious, educational, literary, scientific, social, athletic or charitable purpose, or who have constituted themselves for any such purpose, may apply to the Minister …..for a certificate of incorporation of the trustees as a corporate body.”
EFFECT OF INCORPORATION
One the trustees of a charitable entity have been incorporated under the Act, they become a body corporate with a perpetual succession and all other legal indicia appertaining to a body corporate. Section 3(3) of the Trustees (Perpetual Succession) Act states that, once incorporated “the trustees shall thereupon become a body corporate by the name described in the certificate, and shall have perpetual succession and a common seal, and power to sue and be sued in their corporate name and, subject to the conditions and directions contained in the certificate, to hold and acquire, and by instruments under the common seal to convey, transfer, assign, charge and demise any movable or immovable property or any interest therein now or hereafter belonging to, or held for the benefit of, the trust concerned in the same manner and subject to such restrictions and provisions as trustees might so do without incorporation”.
INCORPORATION PROCEDURAL REQUIREMENTS
For the trustees to get incorporated, they should prepare a Trust Deed. The Trust Deed inter alia defines:
• the objects of the Trust;
• the Name of the Trust;
• the powers of the trustees;
• the powers to change and appoint additional trustees;
• resignation and removal of trustees; and
• meeting of trustees.
Execution and stamping of the Trust Deed
Once the trust deed has been approved by the trustees, the deed should be signed as appropriate and thereafter stamped with nominal duty of KShs.200.
Stages of Incorporation
The incorporation of a charitable trust involves two stages:
(a) Registration under the Registry of Documents Act
After stamping being stamped with duty, the trust deed should be presented for registration at the Registry of Documents at Ardhi House. The Registry of Documents is established under the Registry of Documents Act (Chapter 285 of the laws of Kenya). The registration under this Act takes about 1 or 2 weeks.
It should be noted that registration under the Registration of Documents Act does not make a trust into a body corporate. However, once the trust is registered under this Act, the trustees can commence implementing the objects of the trust as a simple trust.

(b) Incorporation under the Trustees (Perpetual Succession) Act
After registration under the Registry of Documents, a certified copy of the trust deed and a petition for incorporation prepared in the prescribed form should be lodged with the Minister for Lands for incorporation of the trust. The petition must state, among other things, that the trustees are desirous of being incorporated under the Act and give a pictorial representation of the common seal of the trust, which must be rounded in shape and with the name of the trust inscribed thereto. The Minister for Lands normally takes about 2 to 3 months after presentation of the petition to issue the Trustees with a Certificate of Incorporation.

TRUSTEES
Please note that the first trustees of an incorporated trust are nominated in the trust deed, and their names will be noted in the certificate of incorporation of the trust. Thereafter, these trustees may retire and new ones appointed as per the provisions of the trust deed. Moreover, additional trustees may be appointed as per the provision of the trust deed. Every change of trustees must be reported to the Registrar of Documents in the prescribed form and noted in the original certificate of incorporation of the Trust.
Nationality of Trustees
The trustees of an incorporate trust may be individuals, both local and foreigners, or a body corporate in the nature of a trust corporation, or a mixture of both. However, the Trustee Act provides that a foreign trustee who remains out of Kenya for a period exceeding 12 months may be removed from office by the remaining trustees.
The trustees are duty bound to comply with the provisions of the trust deed establishing the trust as well as the applicable legal provisions. Trustees must also act in the best interest of the trust and avoid conflict of interest situations. The trustees are however permitted to delegate some of their functions to a committee of trustees or employees of the trust.
When incorporated the trustees are require to exercise their powers and make decisions through resolutions of the board of trustees at duly constituted meetings of trustees. Meetings may also be held through an electronic medium which allows participants to communicate with each other e.g. teleconference or video conference, if this is provided for in the trust deed. Most trust deeds also provide that a resolution assented to in writing by all the trustees shall be deemed to have been duly made notwithstanding the absence of a meeting to resolve the matter.
Normally, the trust deed will also contain a provision empowering the trustees to enact regulations to govern the conduct of their meetings including order of business, voting rights, procedure of recording minutes.
ADVANTAGES OF INCORPORATION AS A CHARITABLE TRUST
(a) The trust becomes a body corporate with:-
• perpetual succession and common seal, whose existence is not affected by the death or other incapacities of its trustees;
• legal capacity to own property in its own name;
• ability sue and be sued in its own name; and
• ability to hire employees in its own name.
(b) The trust is eligible to apply for and obtain:-
• tax exemption from the Kenya Revenue Authority pursuant to paragraph 10 of the First Schedule to the Income Tax Act;
• exemption of land rates payable on its immovable properties; and
• exemption on stamp duty when buying land and property pursuant to section 52(2) (b) of the Stamp Duty Act.
CHANGE OF NAME AND DISSOLUTION
An incorporate trust may by means of a resolution change its name by mean of a special resolution which must be registered at the Lands Office and noted in its original certificate of incorporation. An incorporated trust also may by means of a special resolution resolve to dissolve, in which case its assets could be transferred to another charitable entity with similar objects.

 
 

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Establishment of Business in Kenya by a foreign company or corporation

If a foreign incorporated company or corporation intends to establish presence in Kenya, there are two options that are available. It can be incorporated in Kenya as;

(a) a locally incorporated private company; or
(b) registered as a branch office of a foreign company.

(a) Locally incorporated private company
Incorporation of a company in Kenya is relatively straight-forward in most cases. Companies are usually incorporated as private companies limited by shares. A private company is a company which restricts the right to transfer its shares, limits the number of shareholders to 50 (excluding employees), prohibits offers to the public of its shares and debentures and cannot issue bearer shares. A private company must have a minimum of 2 shareholders.
Advantages
Private companies enjoy a number of privileges including an exemption from the requirement to file annual accounts at the Companies Registry.
Procedure
A summary of the information required for the purposes of incorporation and the costs involved are set out below;
1. An application is made to reserve the proposed name with the Registrar. The Registrar has the right to reject names he considers undesirable or which are similar to the names of existing companies. It is therefore advisable to apply for 2 or 3 alternative names. The name must include the word “Limited” unless special dispensation is obtained (essentially confined to charitable bodies).
2. Preparation of the Memorandum and Articles of Association of the company.
Unless special minority protection is required, these will be very much in standard form. The Memorandum sets out the objects of the company in detail and particulars of its authorised share capital. It is necessary to set out all the anticipated activities of the company as part of its main objects of association. We will therefore need a reasonably comprehensive description of the company’s proposed business. This need not extend to normal ancillary powers (e.g. borrowing powers) which we will include as a matter of course.
It is usual to incorporate the company with a nominal amount of authorised share capital (Shs.2,000) which can be increased at a later date. Stamp duty of 1% is payable on authorised share capital. Although the obligation to pay for shares can be expressed in any currency, the actual share capital of the company is invariably designated in Kenya Shillings.
The Articles will contain the regulations for conducting the company’s affairs. It will be necessary to consider various matters including: whether the issue and transfer of shares are to be subject to pre-emption rights, the size of the board of directors, the quorum for meetings of shareholders and directors, whether the directors are subject to retirement by rotation, any special rights conferred on shareholders to appoint directors etc. In the case of a wholly-owned subsidiary, most of these will be designed for ease of administration. .
3. The Memorandum and Articles must be signed by at least 2 persons who will subscribe for at least one share each. In most cases, the initial subscription is done by 2 partners of Sichangi Partners Advocates in order to quicken the process. The shares subscribed will be held in trust for the intended shareholders whose names and addresses will be required for the purposes of preparing the necessary declarations of trust. The shares can then be transferred after incorporation. Stamp duty of Shs.200 (approximately US$3) are payable on the declarations of trust and subsequent share transfers.
4. The Memorandum and Articles and a Statement of the Nominal Capital are then lodged for stamping. Due to past frauds, there are now extensive audit procedures in place at the stamp duty office as a result of which two (2) working weeks must be allowed for stamping.
5. After stamping, the documents are presented to the Registrar of Companies together with the following prescribed forms:
(a) Particulars of the registered office. The full physical and postal address of the registered office must be supplied. This includes the land reference number.
(b) Particulars of the directors and company secretary including their full names, usual postal address, nationality and business occupation. It is usual to have a minimum of 2 directors. There are no unusual restrictions as to who may be appointed a director. In particular, there is no requirement that a director be a resident or citizen of Kenya. Companies may also act as directors.
(c) A Declaration of Compliance by the advocate attending to the incorporation of the company.
6. Incorporation is complete when the Registrar issues a Certificate of Incorporation which must be displayed at the registered office.
Post-incorporation
Common seal
The company will require a common seal for executing certain types of documents (e.g. office leases). Common seals are manufactured locally at a cost of approximately Shs.2,300 (US$30) and we should be pleased to make the necessary arrangements.
Licences and other registrations
Most companies will require some form of government or local authority licence before commencing business depending upon the nature of the business. We should be pleased to provide specific advice on the licences which may be required. There will also be a number of tax registrations which must be attended to including:
• the obtaining of a PIN number
• various employee related tax registrations (Pay As You Earn, National Social Security Fund, National Hospital Insurance Fund and Local Authority Service Charge)
• value added tax (where appropriate)

(b) Registration as a branch of a foreign Company
The above company may also establish liaison or branch office .In that case, it will have to register itself as a foreign company under Section 366 of our Companies Act. The documents required to be filed at the company’s registry to enable us to complete the necessary returns and file them at the companies Registry with all other necessary documents are:

a) A certified true copy of the Memorandum and Articles of Association of the company certified as a true copy by a notary public and notarised true copy of Certificate of Incorporation.

b) The present physical and postal address of the company. We will type this information into the necessary return once you provide us with this information.

c) The full names, addresses, nationalities and occupations of each of the directors and the company secretary. We will type this information into the necessary return once you provide this information.

d) The full name and physical and postal address of someone in Kenya who is appointed as the representative to accept service of papers on behalf of the company in Kenya. If you wish one of our partners can be named initially but you will subsequently have to appoint the representative who is sent to Kenya to run the office or a firm of accountants for this purpose. The accountants will also have to file the necessary tax returns for the company with the tax authorities (see below).


1. Procedure and time scale

The returns containing the information referred to in (b) to (d) above have to be signed by the person referred to in (d) above. Once this is done and we have been provided with the notarised copies of the documents referred in (a) we can lodge the application at the Companies Registry to register the company. It generally takes about 2 to 3 4 weeks from the date of filing such papers for the Registry to issue the Certificate of Compliance which signifies the registration of the company.

4. Various other requirements

Any expatriates who are to operate the company’s branch office in Kenya will need class A entry permits under the provisions of the Immigration Act before they can start to operate the Nairobi Office and they will in due course have to obtain PIN numbers for tax purposes.

The company will have to make PAYE deductions and certain other statutory deductions from the monthly salaries of employees in the Nairobi Office and file certain statutory returns in connection with such deductions from time to time. A local firm of accountants can advise you on these requirements once the company is registered.

The company will only have to pay Kenya corporation tax on any income which it derives from its activities in Kenya. Tax is not charged on funds sent into Kenya to finance the operation of such liaison offices.

Provided that the liaison office does not import, export retail or wholesale goods or services it will not require a trade licence under the Trade Licensing Act if it does this then it will have to obtain a trade license. No other licences, authorities or consents are presently required under the laws of Kenya to operate a liaison or branch office of a foreign company.

5. Opening of a bank account

A local bank will require a certified true copy of the Certificate of Compliance when the bank account is to be opened in the name of the foreign company. The account can be a foreign currency account into and out of which foreign currency can be freely remitted for the company’s expenses whenever they are incurred. The Certificate of Compliance will be issued by the Companies Registry on registration of the company and we can certify as many photocopies as you wish as true copies

If you require more information on this, please do not hesitate to contact me via mainacy@gmail.com

 
 

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Re: Advice on Incorporation of a Religious Congregation under the Trustees (Perpetual Succession) Act

Under the laws of Kenya, it is possible for religious congregations to be registered under The Trustees (Perpetual Succession) Act (Chapter 164 of the Laws of Kenya) in order to become an body corporate, with the capacity to own property in its own name. This Act in section 4(1) thereof provides that, “Trustees who have been appointed by anybody or association of persons established for any religious, educational, literary, scientific, social, athletic or charitable purpose, or who have constituted themselves for any such purpose, may apply to the Minister …..for a certificate of incorporation of the trustees as a corporate body.”
EFFECT OF INCORPORATION
As stated above, once the trustees have been incorporated they become a body corporate with a perpetual succession and all other legal indicia appertaining to a body corporate. Section 3(3) of the Trustees (Perpetual Succession) Act states that, once incorporated “the trustees shall thereupon become a body corporate by the name described in the certificate, and shall have perpetual succession and a common seal, and power to sue and be sued in their corporate name and, subject to the conditions and directions contained in the certificate, to hold and acquire, and by instruments under the common seal to convey, transfer, assign, charge and demise any movable or immovable property or any interest therein now or hereafter belonging to, or held for the benefit of, the trust concerned in the same manner and subject to such restrictions and provisions as trustees might so do without incorporation”.
INCORPORATION PROCEDURAL REQUIREMENTS
For the trustees to get incorporated, they should prepare a Trust Deed. The Trust Deed inter alia defines:
• the objects of the Trust;
• the Name of the Trust;
• the powers of the trustees;
• the powers to change and appoint additional trustees;
• resignation and removal of trustees; and
• meeting of trustees.
Execution and stamping of the Trust Deed
Once the trust deed has been approved by the trustees, the deed should be signed as appropriate and thereafter stamped with nominal duty of KShs.200.
Stages of Incorporation
The incorporation of a charitable trust involves two stages:
(a) Registration under the Registry of Documents Act
After stamping being stamped with duty, the trust deed should be presented for registration at the Registry of Documents at Ardhi House. The Registry of Documents is established under the Registry of Documents Act (Chapter 285 of the laws of Kenya). The registration under this Act takes about 1 or 2 weeks.
It should be noted that registration under the Registration of Documents Act does not make a trust into a body corporate. However, once the trust is registered under this Act, the trustees can commence implementing the objects of the trust as a simple trust.
(b) Incorporation under the Trustees (Perpetual Succession) Act
After registration under the Registry of Documents, a certified copy of the trust deed and a petition for incorporation prepared in the prescribed form should be lodged with the Minister for Lands for incorporation of the trust. The petition must state, among other things, that the trustees are desirous of being incorporated under the Act and give a pictorial representation of the common seal of the trust, which must be rounded in shape and with the name of the trust inscribed thereto. The Minister for Lands normally takes about 2 to 3 months after presentation of the petition to issue the Trustees with a Certificate of Incorporation.
TRUSTEES
Please note that the first trustees of an incorporated trust are nominated in the trust deed, and their names will be noted in the certificate of incorporation of the trust. Thereafter, these trustees may retire and new ones appointed as per the provisions of the trust deed. Moreover, additional trustees may be appointed as per the provision of the trust deed. Every change of trustees must be reported to the Registrar of Documents in the prescribed form and noted in the original certificate of incorporation of the Trust.
Nationality of Trustees
The trustees of an incorporate trust may be individuals, both local and foreigners, or a body corporate in the nature of a trust corporation, or a mixture of both. However, the Trustee Act provides that a foreign trustee who remains out of Kenya for a period exceeding 12 months may be removed from office by the remaining trustees.
The trustees are duty bound to comply with the provisions of the trust deed establishing the trust as well as the applicable legal provisions. Trustees must also act in the best interest of the trust and avoid conflict of interest situations. The trustees are however permitted to delegate some of their functions to a committee of trustees or employees of the trust.
When incorporated the trustees are require to exercise their powers and make decisions through resolutions of the board of trustees at duly constituted meetings of trustees. Meetings may also be held through an electronic medium which allows participants to communicate with each other e.g. teleconference or video conference, if this is provided for in the trust deed. Most trust deeds also provide that a resolution assented to in writing by all the trustees shall be deemed to have been duly made notwithstanding the absence of a meeting to resolve the matter.
Normally, the trust deed will also contain a provision empowering the trustees to enact regulations to govern the conduct of their meetings including order of business, voting rights, procedure of recording minutes.
ADVANTAGES OF INCORPORATION AS A CHARITABLE TRUST
(a) The trust becomes a body corporate with:-
• perpetual succession and common seal, whose existence is not affected by the death or other incapacities of its trustees;
• legal capacity to own property in its own name;
• ability sue and be sued in its own name; and
• ability to hire employees in its own name.
(b) The trust is eligible to apply for and obtain:-
• tax exemption from the Kenya Revenue Authority pursuant to paragraph 10 of the First Schedule to the Income Tax Act;
• exemption of land rates payable on its immovable properties; and
• exemption on stamp duty when buying land and property pursuant to section 52(2) (b) of the Stamp Duty Act.
CHANGE OF NAME AND DISSOLUTION
An incorporate trust may by means of a resolution change its name by mean of a special resolution which must be registered at the Lands Office and noted in its original certificate of incorporation. An incorporated trust also may by means of a special resolution resolve to dissolve, in which case its assets could be transferred to another charitable entity with similar objects.
If your Church resolves to incorporate under the Trustees (Perpetual Succession) Act, we should be happy to prepare the relevant trust deed and other documentation on your behalf. Meanwhile, please do not hesitate to contact the writer via mainacy@gmail.com if you require any further information or clarification.
 
 

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Registering a NGO/ Charitable Organisation in Kenya

Registration of NGOs under Kenyan Law

The Non-Governmental Organisations Co-Ordination Act 1990 (Section 2) defines an NGO as “a private voluntary grouping of individuals or associations, not operated for profit or for other commercial purposes but which have organized themselves nationally or internationally for the benefit of the public at large and for the promotion of social welfare, development charity or research in the areas inclusive of, but not restricted to, health, relief, agriculture, education, industry and the supply of amenities and services”.

As this definition includes both local and foreign NGO’s the procedure for registration is similar for both. The only difference is that foreign NGO’s are subject to some additional requirements. The additional requirements in the case of such foreign NGO’s are as follows:

• the organization has to furnish the constitutions of its other branches around the world;
• 1 out of 3 officials of the Kenya branch must be a Kenyan citizens; and
• the officials must be of outstanding character. In the wake of the 11th September 2001 terrorist attack in the USA the NGO’s Board now requires satisfactory references to vouch for the NGOs officials.

Registration Process
The procedure for the registration of an NGO is contained in Sections 10-11 of the Act and Part III of the Regulations (L.N. 152/1992). All applications are to be submitted to the Non-Governmental Organisations Co-Ordination Board, which is based in Nairobi.

Approval of Names
Before an application for registration is made, approval must be obtained from the Director of the Non-Governmental Organizations Board for the name of the NGO to be registered. The application should be made on Form 2, Schedule 1 and should be accompanied by the reservation fee is Kshs.500 (approximately US$ 7).
On receipt of the application and the fees, the Director shall carry out a name search and shall notify the applicant if the name has been approved or not and in the later case, the grounds for rejection will be stated.
If the name is approved it will be entered in a register for reserved names for a period of thirty days or for a longer period not exceeding sixty days. This period commences from the date of notification of name approval to the applicant.
Application for Registration
The application should be in Form 3, Schedule 1. The information to be supplied is basically that set out in Section 10 (3) of the Act which requires the application to be made by the Chief Officer of the proposed organisation and should specify:
a) Other officers of the organisation.. Form 3 specifically states that the personal particulars of the NGO’s three officers must be supplied. These officers must supply two recent passport photographs be resident in Kenya or must intend to take up residence in Kenya once the organization is operational. In practice, after an application is submitted the NGO Board staff will interview at least one official of the proposed NGO on the background of the organization and its funding arrangements.
b) The Head office and postal address of the organisation
c) The sectors of the proposed organisation
d) The districts, divisions and locations of the proposed activities
e) The proposed average annual budgets. These should be an estimate of the proposed spending on various activities. All sources of funding will have to be specified in the application and any national and international affiliation must be disclosed. The NGO Board has indicated that local NGOs must have a “base capital” of Kshs.10,700 (approximately US$ 135) and international NGOs a “base capital” of Kshs.20,700 (approximately 260) or else their registration will not be approved. This is an example of a requirement which has developed ad hoc and is not prescribed in either the Act or the Regulations.
f) The duration of the activities
g) All sources of funding
h) The national and international affiliation and the certificates of incorporation

The application forms must be accompanied by:
a) Five copies of a letter from the sponsor, that is the person or body providing primary financial and material support towards the project.. The letter from the sponsor confirming that it will provide financial and material support to the NGO must be submitted with the application for registration.
b) Two copies of the Organisation’s constitution as well as copies of the constitutions, deeds or statutes of any branches in countries other than Kenya.
c) Two current passport sized photos of the applicant duly endorsed by the sponsor or referee
d) Certificate of registration outside Kenya
e) A copy of the minutes of the proposed Organisation authorising the filing of the application
f) A notification of the location of the office and postal address of the proposed organisation in Form 4, Schedule 1 signed by the chief officer of the proposed organisation
g) The application fee. The application fee for registration of an International NGO is set at Kshs. 22,000. The NGO Board tends to treat NGOs that have foreign sponsors as international NGOs and they must therefore pay the higher registration fee
The application should be typewritten and signed by the Chief Officer of the proposed organisation.

Additional Information
The NGO board and the Director may, under the Act and the Regulations, request for further or better information on the proposed organisation as he may require. Pursuant to this provision the application should include particulars of the founders of the proposed organization, whether Kenyan or foreign. The Board will then carry out “background checks” on the founders; it is not revealed what these entail but it can be assumed that security checks are carried out.
Constitution
The proposed NGO must have a constitution specifying its objects. The NGO Board issues guidelines stating what registration will be rejected if the proposed constitution does not comply with these guidelines.
a) The constitution must be subscribed to by at least three members. Non-natural legal persons are permitted to be subscribers and members of NGOs.
b) the NGO’s name
c) the NGO’s objects and administrative units
d) The custody, use and investment of the funds and property of the Non-Governmental Organisation and the designation of the persons responsible thereof.
e) persons or entities for whom membership is open
f) structure and management of the NGO including
 titles of officers, trustees, auditors and their terms of office and methods of election, appointment, dismissal and suspension
 composition of committees and their terms of office and methods of election, appointment, dismissal and suspension
g) quorums for and dates of general meetings
h) financial year and periodicity of audit of accounts
i) inspection of books and list of members
j) formation of branches
k) manner of amending the NGO’s name, constitution or rules
l) manner of disposal of the NGO’s property on dissolution.
m) The Schedule also requires that the purpose for which an NGO’s funds may be used must be specified. In particular, every constitution must prohibit the distribution of the NGO’s funds and assets among its members. Clauses which may constitute loopholes for such distribution to members or officials are also prohibited unless they provide for the legitimate reimbursement of expenses incurred in carrying out the NGO’s objects. The constitution should also contain rules governing the awarding of contracts to members or officials.

The Constitution of an NGO must comply with the prescriptions of the Second Schedule of the Regulations. Preferably this should be prepared by a Kenyan Advocate.

Most constitutions provide for a governing council in the form of a board of management to manage the day to day activities of the NGO. The board may appoint a chairman but not a president.

The board’s powers and rules for voting would depend on the constitution of the NGO in question, they are not prescribed by law. Generally, matters are decided by a majority of votes. Constitutions tend to require the disclosure by members of any interests in contracts. Such members are usually not permitted to vote on such matters.

The constitution of an NGO may contain provisions indemnifying members of the board and of the NGO against all costs, losses and expenses they may incur by reason of any contract they enter into or act or thing they do in good faith.

Refusal of registration
The Board has power to refuse to register a proposed NGO if it is satisfied that:
a) its proposed activities or procedures are not in the national interests; or
b) the applicant has given false information in the application; or
c) based on a recommendation of the National Council Organizations (which acts as a collective forum for all NGOs registered under the Act), the applicant should not be registered.
Where the Board does refuse to register an NGO, it must notify the applicant of its refusal within 14 days of its decision in Form 6, Schedule 1. The Act does not specify what an applicant’s rights are if the Board fails to comply with this requirement.

If the applicant feels aggrieved, an appeal from the Board’s decision may be made to the Minister responsible for NGOs. Such an appeal must be made within 60 days from the date of the Board’s decision. The Minister must in turn make his decision within 30 days of receiving the appeal and may request written comments on the matter from the NGO Council.
If the applicant is still not satisfied with the decision of the Minister then a final appeal lies with the High Court of Kenya.

Effects of Registration
Upon registration an NGO becomes a body corporate capable in its name of:

a) suing and being sued;
b) taking, purchasing or otherwise acquiring, holding, charging or disposing of movable and immovable property;
c) entering into contracts; and
d) doing or performing all such things or acts necessary for the proper performance of its functions under the NGO Co-ordination Act.

As a result of its corporate status an NGO registered under the NGO Co-ordination Act does not enjoy any immunities against prosecution such as those available to diplomatic or consular missions.

The NGO Regulations provide that an NGO cannot:

a) change its name or constitution; or
b) become a branch of or in any way affiliated or connected with any organization or group of a political nature which is established outside Kenya; or
c) dissolve itself

without the written consent of the NGO Co-ordination Board.

NGOs tend to be viewed by the Kenyan authorities as potential vehicles for political subversion. In this regard the Kenyan government has repeatedly warned that NGOs interfering in matters of a political nature risk being struck off the NGO register, although it is difficult to determine whether such warnings have ever been implemented in practice.

The NGO Council has adopted a code of conduct that must be followed by all NGOs. If a person feels that an NGO has breached the code then such a complaint may be directed to the NGO Council. The complaint must be in writing setting out the particulars of the alleged breach.

Complaints may be directed to the Chief Executive Officer, National Council of NGOs, Nairobi.

As a body corporate, an NGO may also be sued by its beneficiaries.

(a) The advantages of registering as an NGO include:
(i) Exemptions from duty on imported equipment and goods required for the NGO’s activities in Kenya under certain circumstances.
(ii) Exemptions from Value Added Tax on the NGO’s income generating activities under certain circumstances.
(iii) Exemptions from income tax on the NGO’s expatriate employees.
(iv) Limited liability on members if so provided under the NGO’s constitution.
(v) Applications may be recommended by the NGO Board for Entry Permits in respect of expatriate employees.
(b) The disadvantages of forming an NGO include:
(i) Lengthy delays in the registration process which can be over a year arising from a lengthy vetting process which involves the NGO’s Board seeking of recommendations/objections from relevant government departments or ministries.
(ii) Compliance with various rules. The application for registration as an NGO is to be made in the prescribed form and it must be accompanied with amongst other things, a detailed budget and a certified copy of the constitution of the organisation which must comply with various matters set out in the NGO Rules. Once registered, it must comply with the Code of Conduct for NGOs.
(iii) Various reporting requirements. An annual report has to be made in the prescribed form and submitted to the NGO Board on or before 31st May in every year. Such annual reports outline the projects undertaken by the NGO and how the funds received by donors have been utilized in the projects. The reports become part of the public record and can be inspected by any person upon payment of a fee. In addition, returns have to be filed whenever there are changes in the registered office or postal address or changes of officers or their titles.
(iv) Various restrictions. Once registered, an NGO must not:
• amend its name or constitution and;
• become a branch of or affiliated to or connected with any organisation of a political nature established outside Kenya
except with the prior written consent of the NGO’s Board.
 
 

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