SCOPE OF THE BANKING (AMENDMENT) ACT, 2015

The President of the Republic of Kenya, assented to the Banking (Amendment) Act, 2015 on August 24, 2016. The Act seeks to protect consumers from high interest rates being charged by Banks and financial institutions. Borrowers in Kenya have over the years been subject to predatory lending practices, they have been faced with overwhelming interest rates due to Banks having the flexibility and the power to determine interest rates.

The principal object of the Act, is to provide a mechanism for regulation of banks and financial institutions' rates through the introduction of ceilings being a regulatory measure that the maximum interest rate that a Bank or a financial institution can charge a borrower for a loan. 

The Act amends section 33A of the Principal Banking Act (cap 448) of the Laws of Kenya by insertion of a new section bestowing powers to the Central Bank to enforce interest ceilings.

It provides that a Bank or a financial institution shall set the maximum interest rate chargeable for a credit facility in Kenya at no more than 4%, the base rate set and published by the Central Bank of Kenya. This means that no Bank or financial institution will have the liberty of setting their own interest rates as before, where they were able to exercise this flexibility they will have to comply with this section by ensuring that the interest rate does not exceed 4% of the base rate set by the Central Bank of Kenya.

It is also provided that the  minimum interest rate granted on a deposit held in interest earning in Kenya should not go below 70% of the base rate set by the Central Bank of Kenya.

The Act also attaches criminal sanctions to a Bank or financial institution for entering into an agreement or an arrangement with a person to lend directly or indirectly at an interest rate in excess of that prescribed by the law. A bank or a financial institution that contravenes this  shall be liable to a fine of not less than One (1) million shillings, or to imprisonment for a term not less than One (1) year, or to both.

It shall be also be required of a bank or financial institution to fully disclose to a borrower all the charges and terms relating to the loan prior to granting a loan. This is a very important aspect as now a consumer can compare the prices and terms of credit from different sources.

As regards commencement of the Act it is not provided when it shall come into force, however the Interpretation and General Provisions Act under Section 9 provides that "an Act shall come into operation on the day on which it is published in the Gazette however if it is enacted in the Act, or in any other written law, that the Act or any provision thereof shall come or be deemed to have come into operation on some other day, the Act or, as the case may be, that provision shall come or be deemed to have come into operation accordingly." In this case the Act is silent on commencement and hence it will be deemed to come into force on the date in which it is published in the Kenya Gazette. 

LEGAL SERVICES KENYA: BEFORE SIGNING THAT EMPLOYMENT CONTRACT

LEGAL SERVICES KENYA: BEFORE SIGNING THAT EMPLOYMENT CONTRACT: The Employment Act of Kenya provides that a contract of service for a period equivalent of three (3) months or more should be in writin...

CHANGE OF USER PROCESS IN KENYA

Change of user is a very sensitive aspect of Land in Kenya. It is advisable that prior to acquiring a piece of land, to know the user of the property especially for developers as the process itself can prove to be very expensive and time consuming. Most people buy agricultural property with the intention of developing it for real estate purposes without knowing its use, this can be very detrimental as one cannot be able to develop the property without a change of user approval.

However, today there are sellers of property who go an extra mile to sell properties with the Change of user approval already obtained but very few hence it is always advisable to exercise due diligence prior to purchasing any property.

The whole aspect of change of user is a mechanism used by the government to control land use and development in Kenya, as we all know the government is the ultimate custodian of property in Kenya. Failure to obtain a Change of user approval can lead to the government repossessing the land.

Below are the various steps that need to be taken to obtain a Change of user approval in Kenya:

• Application using Form PPA1(in triplicate) duly signed by a registered physical planner.

• Notice is then published within fourteen (14) days inviting objections from the public.

• Preparation of the planning brief by the registered physical planner which is then submitted to the governing county government physical department  for approval together with payment.

• The application is reviewed by the relevant County government and if the changes sought are not in contravention to any statute or planning principles, an approval is issued-Form PPA2.

• The form PPA2 is further submitted to the National Land Commission for approval.

• The PPA2 is then circulated to the Director of Survey and Director of Physical planning.

• Next step is organizing for a site report through a licensed surveyor who submits comments to the National Land Commission on behalf of the Director of Survey and Director of physical planning.

• Obtaining a valuer for Land rent enhancement.

• The property is then re-surveyed and a new deed plan is obtained.

• The new deed plan together with the old Title to the property is submitted to the National Land Commission, where the surrender of Title is prepared and signed by the land owner.

• New Title is prepared indicating the new user of the property and submitted for registration.

It is always important to engage professionals in this process. If you wish to obtain a change of user approval in Kenya please do not hesitate to contact us on legalserviceskenya@gmail.com.

APPLYING FOR A WORK PERMIT IN KENYA

A work permit is an official document giving a foreigner permission to take a job in a country. In Kenya, Work Permits are issued by the Department of Immigration to any foreigner wishing to engage in employment in Kenya whether in gainful employment or voluntary service. 

It is illegal for any foreigner to work in Kenya without a valid work permit. The Law governing issuance of work permits in Kenya is the Kenya Citizenship and Immigration Act, 2011 of the Laws of Kenya. 

The Act provides that the Director shall issue a permit of the required class to a person who is not a prohibited immigrant or inadmissible person, who has made an application in the prescribed manner; and satisfied the Committee that he has met the requirements relating to the particular class of permit.  

Work permits in Kenya are issued in various classes,below are the different classes:

Class A

This permit is issued to persons who intend to engage in prospecting for minerals or mining.

Requirements.

◦Obtain or is assured to obtain the necessary licenses and registrations.

◦Sufficient capital or resources for investment. 
◦In an application for renewal of a permit a current license held for prospecting minerals and copy of PIN is required.

Class B

This work permit is issued to persons wishing to invest in Agriculture and Animal Husbandry. 

Requirements.
◦Proof of leasehold interest in land for the purpose.
◦Proof of capital available for the purpose.
◦Clearance from relevant bodies. 
◦In an application for renewal of the permit a current license held for prospecting minerals and copy of PIN is required.

Class D

This work permit is issued to a person who is offered specific employment by a specific employer who is qualified to undertake that employment. 

Requirements.

◦Copies of academic/professional certificates together with the Curriculum Vitae.◦Evidence that the organization failed to fill the vacancy from the local labor market.◦Dully filled Form 25, signed and sealed by the company.

Class G

This work permit is issued to investors in specific trade, business or consultancy.

Requirements.

◦Documentary proof of capital to be invested/already invested being a minimum of  US dollars  100,000 or its equivalent in any other currency.
◦Certificate of incorporation of the Company
◦Copies of personal and company PIN (Personal Identification Number) if business is running.
◦In an application for renewals one should provide audited accounts for previous 2 years and a certificate of tax compliance from the Kenya Revenue Authority.

Class I

This work permit is issued to a member of missionary society approved by the Government of Kenya and whose presence is beneficial to the country.

Requirements.

◦A copy of Certificate of Registration of the organization. 
◦Academic and professional certificates of the applicant. 


Class K

This is a residence permit issued to persons who have an assured income derived from sources outside and undertakes not to accept paid employment of any kind.

Requirements.

◦Documentary proof of assured income.

Class M

Work permit issued to Conventional Refugees.

Requirements.

◦Recognition letters from UNHCR and Department of Refugee Affairs.

Note: Section 41 (2) of the Act provides that a person to whom a work permit of class M is issued may engage in any occupation, trade, business or profession.


OTHER REQUIREMENTS

◦Dully filled and signed application form (Form 3).
◦Cover letter from employer/self/organization depending on the class (as applicable)
◦Copies of the National Passport.
◦Two coloured Passport size photographs.

PROCEDURE:

An person applying for a work permit should compile all the required documentation together with the prescribed fees applicable for the specific class and present them to the Department of immigration.

The prescribed fees for each class is as below:

CLASS A	MINING	10,000	250,000 FEE P/A
CLASS B	AGRICULTURE	10,000	100,000 FEE P/A
CLASS D	EMPLOYMENT	10,000	200,000 FEE/PA
CLASS G	INVESTORS	10,000	100,000 FEE/PA
CLASS I	RELIGION AND CHARITY	1,000	5,000 FEE/PA
CLASS K	ORDINARY RESIDENTS	10,000	100,000 FEE/PA
CLASS M	REFUGEES	GRATIS/FREE	GRATIS/FREE

Invalidation of a work or residence permit

The Act provides that where a permit has been issued to a person, and that person fails, without the written approval of the Director, to engage within ninety days of the date of issue of the permit or of that person’s entry into Kenya, whichever is the earlier, in the employment, occupation, trade, business or profession in respect of which the permit was issued or take up residence; ceases to engage in the said employment, occupation, trade, business or profession; or engages in any employment, occupation, trade business or profession, whether or not for remuneration or profit, other than the employment, occupation, trade, business or profession applied for, the permit shall cease to be valid and the presence of that person in Kenya shall be unlawful, unless otherwise authorized. 

If you wish to obtain a work permit in Kenya please do not hesitate to contact us on legalserviceskenya@gmail.com.

REGISTRATION OF NGOs IN KENYA

NGOs  in Kenya are generally governed by the Non-Governmental Organisations Co-ordination Act, 1990. The Act defines a Non Governmental Organisation 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.'

Registration of NGOs is basically expressed under Part III of the Act. The steps involved in the Registration of an NGO in Kenya is as stipulated below:

• Name Search: This is done by filling Form 2 and upon payment of the application fees, the name search is conducted and once approved the name is reserved for a period of thirty (30) days.

• Once a name has been reserved the next step is filing a formal application for registration, this is done by filling Form 3 (in triplicate) in original forms to be submitted to the executive director of the Bureau in the prescribed form.

• A duly filled Form 1, just one copy basically stating the contact person of the organisation.

• Copy of National Identity Cards/Passports and PIN Certificates for the proposed officials and Board members.

• Two (2) colored passport size photographs on a white background (2 by 2 inches) of the proposed officials and board members with their names and organization written at the back.

• For Kenyan citizens a Copy of a police clearance certificate of Good Conduct including the finger prints and receipts and for foreigners a notarized clearance certificate from their Country should be provided. (not more than six(6) months old).

• Two (2) Copies of the Constitution of the proposed NGO, duly signed  by the proposed officials and two board members.One of the proposed officials must also execute each page of the Constitution.

• Proposed One(1) Year budget of the NGO.

• A forwarding letter addressed to the Executive Director requesting for registration.

• It is a requirement that for foreign based NGOs, at least 1/3 of the board members must be Kenyan Citizens.

• Minutes authorizing the filling of the application with a specific agenda and resolution to register the organization as an NGO with the NGOs Board. Election of the interim officials MUST form part of the Agenda.

• Processing fees must accompany the application which is usually Kshs. 16,000/- for National NGOs and Kshs. 30,000/-for foreign NGOs.

Every Non-Governmental Organization registered is then issued with a certificate of registration which serves as conclusive evidence of authority to operate throughout Kenya or such parts of the country as are specified therein. 

Registration however is not guaranteed, the Board as provided under the Act can refuse to register an NGO for the following reasons:

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) it is satisfied on the recommendation of the National Council Organizations, the applicant should not be registered. 

NOTE: For any enquiries on the same please do not hesitate to contact us on legalserviceskenya@gmail.com

REGISTRATION OF A SOCIETY IN KENYA

The registration of a Society in Kenya is governed by the Societies Act (Cap 108) of the Laws of Kenya.

The requirements for registration of a Society in Kenya are as below:

• Name search;
• Number of members in the Society please note that the least number of members required to form a society are at least ten (10);
• Objects of the society;
• Societies application forms which are Form A and B being the application for registration of a society and notification of registered office and address of a society respectively;
• Societies Constitution specimen;
• Notice of the situation of the office and of the postal address of the society;
• Names, postal addresses and occupation of the secretary, chairman and treasurer;
• Application fees.

Registration procedure:

The Societies Act (Cap 108) Laws of Kenya requires that every society shall make an application to the Registrar within twenty eight (28) days after formation thereof for registration or exemption from registration.

For registration of a society, a name search has to first be conducted to ascertain the availability of the proposed names of the society, the applicants have to fill forms A and B being the application for registration of a society and notification of registered office and address of a society respectively, a specimen constitution of the society is then prepared. Once done all the necessary documents are submitted to the Registrar of society together with the application fees.

Upon application being made in the prescribed manner for registration of a society, the Registrar shall, register the society by entering in the register of societies, kept for the purpose, the prescribed particulars and the date of the entry and issue to the Society a certificate of registration. 

Registration is however not guaranteed, the Registrar may reject an application for various reasons such as if he has reasonable cause to believe that the society has among its objects, or is likely to pursue or to be used for, any unlawful purpose or any purpose prejudicial to or incompatible with peace, welfare or good order in Kenya, or that the interests of peace, welfare of good order in Kenya would otherwise be likely to suffer prejudice by reason of the registration of the society; or  the terms of the constitution or the rules of the society are in any respect repugnant to or inconsistent with any law; or he is satisfied that the application does not comply with the Societies Act (Cap 108); or he is satisfied that the society does not exist; or the name under which the society is to be registered is identical to that of any other society which either is existing or has existed, or of any society whose application for registration has been refused or so nearly resembles the name of any other society as, to be likely to deceive the public or the members of either society as to its nature or identity; or is, repugnant to or inconsistent with any law or is otherwise undesirable. 

If you wish to register a Society please do not hesitate to contact us on legalserviceskenya@gmail.com.

WHY YOUR COMPANY SHOULD HAVE A SHAREHOLDERS AGREEMENT

A shareholders Agreement is a Contract between the Shareholders in a Company, it is a private document that does not need to be filed at the Companies registry. It basically governs the relationship between shareholders, however is not a legal requirement to have one. 

A well drafted shareholders' agreement can act as a safeguard to Shareholders. 

Here are the reasons why a Company should have a Shareholders Agreement:

1. Cases of fallout

This is the most important reason why a Company should have a Shareholders' Agreement. Shareholders of a Company do fall out and disagree on a number of issues regarding the running of the business of the Company, one may not foresee this during the formation of a Company. Having a shareholders agreement minimizes any potential for business disputes between owners and provides a framework for conflict resolution. 

2. Signifies Company stability

A shareholders Agreement signifies the stability of a Company to potential partners to the Company, and hence can help in raising finance from Banks or Creditors.

3. Protection of Minority Shareholders

A shareholders Agreement helps to protect the interest of minority shareholders in a Company and their investment.It provides better protection to shareholders as it can only be amended with the Agreement of all shareholders.

4. Shareholders approval 

A shareholders agreement can help in safeguarding the interests of shareholders by stipulating that certain decisions by the Board of Directors can only be made with the approval of shareholders. This helps in safeguarding the interests of Shareholders and helps in prevention of board mismanagement.

5. Share Transfer Control

A Shareholders Agreement can help in control of transfer of shares by stipulating the right of first refusal.

The Shareholders Agreement should contain the following clauses:

• Running of the company's day- to-day affairs, procedure for appointing, removing and paying directors; area of business of operation by the company.
• Transfer of shares, how the shareholders can be able to transfer shares.
• Protection of Minority Shareholders clause.
• Dividends, how and when they should be paid , percentages.
• Dispute/Conflict resolution clause.
• Restrictions clause, to help in protection of the business.
• Duties and responsibilities of shareholders.
• Capital contributions clause.

These are just a few of the reasons why a Shareholders’ Agreement is important. If you wish to discuss a Shareholders’ Agreement for your company, please do not hesitate to contact us on legalserviceskenya@gmail.com.

IMPORTANT FEATURES OF A LIMITED LIABILITY PARTNERSHIPS ("LLPs")

A Limited Liability Partnership combines the features/elements of a Company and the more traditional partnership, this is because it offers limited liability thus protection to its partners the same as a Company does to its shareholders.

The important features of a Limited Liability Partnership are as below:

• LIMITED LIABILITY

This is an important feature of an LLP as the liability of the partners is Limited, hence a partner in the LLP is not personally liable directly or indirectly for obligations  in the partnership, however individuals are liable for their own wrongful acts or omissions.This defers from the general partnerships where liability of partners is usually unlimited.

•  MEMBERS

A limited liability partnership must have at least two partners and one manager. The manager must be a natural person and above the age of eighteen (18) years.

• SEPARATE LEGAL ENTITY

The business usually acquires a corporate identity distinct from its members. This is a great advantage over the general partnership as it can enter into contracts in its own name, hold property in its own name and it can sue and be sued in its own name.The death or exit of a partner does not affect the existence of the Limited Liability Partnership. 

• TAXATION

Taxation in a Limited Liability Partnership is usually on an individual level and not the entity level hence the members in a Limited Liability Partnership are  deemed self-employed and hence each partner will declare their profit and pay tax on their share of profit. 

NOTE: For any enquiries on the same please do not hesitate to contact us on legalserviceskenya@gmail.com

BEFORE SIGNING THAT EMPLOYMENT CONTRACT

The Employment Act of Kenya provides that a contract of service for a period equivalent of three (3) months or more should be in writing. It also goes further to state that a written contract of service should contain the following particulars:

• Name, age, permanent address and sex of the employee
• Name of employer
• Date of commencement of employment
• Job description of employment
• Form and duration of contract
• Place of work
• Hours of work
• Remuneration,scale or rate of remuneration, the method of calculating that remuneration and details of any other benefits; 
• Interval at which remuneration is paid;
• the date on which the employee’s period of continuous employment began, taking into account any employment with a previous employer which counts towards that period; and 
• Any other prescribed matter.

Many people fall victim of excitement of a new job opportunity and they fail to read the terms provided in their employment contract, it is only prudent for one to read and understand the employment contract prior to executing/signing the same.

So what exactly should one look out for in an employment contract:

Job Description

This is a very important aspect of an employment contract as it provides for the exact roles of an employee and the duties the employer will or will not require you to do. It is important to ensure that the Job description is specific and reflects the position that you applied for. The Job description should not seem to impose on the employee any added responsibilities or seem to have a wider scope as with this the employee will be required to take on more tasks which are not necessarily in their Job description.

Place of Work

It is important to check out for this term in the employment Contract as the employer may provide for a wide geographical scope, which you may have not agreed to in the first place. If an employee however signs the contract with a wide geographical scope they will be deemed to have agreed to the same and this puts the employee in a tight position as one will be adversely affected if they refused to work in a new location.

Hours of Work

Do not agree to working hours or work patterns that you will come to regret later on. It is always important to check the number of hours that you will be required to work,according to the General Wages Order, normal working hours are 52  per week and 60 hours per week for the night workers,notwithstanding this, the Employment Act provides that an employee shall be entitled to at least one rest day in every period of seven days. Check whether you are required to work weekends and if you will be required to do overtime and if you will be paid for this.

Notice

It is important to check the notice period that it is not top short or too long. The normal notice period is usually one (1) month. A notice period that is too long may hamper plans to look for  new job and a too short notice affects the stability of the employee.

Salary, Benefits and bonuses

It is only prudent to ensure that the employment contract reflects the salary agreed upon with your employer and when exactly you will be paid, check if there any benefits attached such as medical cover, and also bonuses if they are guaranteed or discretionary.

Termination Causes

The terms of termination in the contract should be clear and provide details of how your service as an employee can be terminated.

Restrictive Clauses

These are clauses such as the non-compete clause, the non-poaching clauses which the employer provides in the employment contract to protect his/her business. This clauses can be very restrictive to an employee especially after termination of employment as it can affect future projects undertaken by an employee.

NOTE: For any enquiries on the same please do not hesitate to contact us on legalserviceskenya@gmail.com

IMPORTANCE OF PAYMENT OF STAMP DUTY IN KENYA

Stamp Duty payment is governed by the Stamp Duty Act cap 480 of the Laws of Kenya. The Act provides that every instrument specified under the Act which relates to property situated, or to any matter or thing done or to be done, in Kenya, shall be chargeable with the stamp duty.

The instrument should be duly stamped with the proper duty before the expiration of thirty (30) days after it is first executed, or after it has been first received in Kenya in case it is first executed at any place out of Kenya, if not done within the time frame it shall attract a penalty for late payment.

Instruments executed out of Kenya not being a bill of exchange or a promissory note, should prior to being used, brought into force or registered, within Kenya, be stamped according to the rate of duty chargeable and within the time frame provided for stamping. 

In the case of Transfer of property, the purchaser/buyer is responsible for payment of stamp duty. The Payment of Stamp duty is made against the value of the property as determined by the Government valuer.

The Stamp duty rate in respect of a transfer of property within a municipality is 4% while for property located outside a municipality is 2%. So where a property x is valued as kenya shillings One Million (Kshs. 1,000,000/-) and it is located within a municipality e.g Nairobi the stamp duty payment shall be 4% of 1,000,000/- which is Kshs. 40,000/-. On the other hand the stamp duty rate in respect of Charges is 0.1%.

There are instances where instruments are exempted from payment of Stamp duty being the following:

• Transfer of property to family owned Company.
• Transfer between associated companies.
• Transfer between spouses i.e husband and wife.
• Transfer in favor of any body of persons established for charitable purposes.
• Transfer by transmission etc.

In certain instances stamp duty exemption can be allowed by one making an application to the Collector of Stamp Duty attaching the necessary supporting documents, transfer, affidavit and the Legal Notice giving effect to exemption. If the application is complete and satisfactory one will be exempted from payment of stamp duty.

NOTE: For any enquiries on the same please do not hesitate to contact us on legalserviceskenya@gmail.com