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

LEGALIZATION OF DOCUMENTS IN KENYA

Legalization of documents is the process  of authenticating or certifying a legal document so a foreign country's legal system will recognize it as with full legal effect.

Legalization of documents in Kenya usually takes the following steps:

• The documents together with either a National Identity Card or Passport of the individual are presented to a Notary public who seals and signs the documents.

• Once this is done, the documents are presented to the High Court of Kenya for authentication, where a letter is issued confirming that the notary public is indeed recognized as one. The fees charged for authentication at the High Court is Kenya shillings 100/- per document.

• The next step is to then present the documents for verification at the Ministry of Foreign affairs, which has a counter at Huduma Center, City Square. The fees charged is usually Kenya Shillings 500/- per seal and one receives a letter.

• The final step is to then take the documents to the relevant embassy, payment of fees usually depends on the rates fixed by the Embassy. The process usually takes 3 or more days, for authentication.

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

REGISTRATION OF TRADEMARKS IN KENYA

The Constitution of Kenya under Article 40(5) provides that the state shall support, promote and protect the intellectual property rights of the people of Kenya.

A trademark, is a recognizable sign, design or expression which identifies a particular product or service from the others.

Any individual or company can register a trademark in so far as they meet the necessary requirements.

Trademark registration and protection is governed by the Trademarks Act of Kenya (Cap 506). Trademarks are registered at the Kenya Industrial Property Institute (KIPI) and the registration lasts for an initial ten(10) years which can be renewed for a further ten(10) years using Form TM10 upon payment of renewal fees.

The procedure for registering a Trademark is as below:

• Preliminary Search

Prior to registration of a Trademark one has to conduct a preliminary search to find out if the mark can be registered or not. This is a very important step for anyone who intends to register a trademark as it helps one know whether the mark is registrable or not and to avid trade mark infringement suits. The search is conducted using Form TM27.

• Application for registration

After confirmation that the trademark can be registered through the preliminary search, the next step would be to lodge an application for registration which is done using Form TM2 and TM32. In the case of foreigners who require to appoint an agent to conduct the registration on their behalf, their application has to be accompanied by Form TM1. The applicant has to also make the necessary payments required for registration.

• Examination by the registrar

The application is fully examined at this stage to determine whether the mark is registrable. Once this is determined an examination report is issued stating whether the mark has been approved for registration or not.

• Advertisement

Once the mark is approved for registration, one should pay the required advertisement fee after which the mark will be advertised in the KIPI Journal for sixty(60) days to allow for any objections to be raised,if no objection is raised then the mark can be able to proceed for registration. However, where there is an objection, Form TM6 is usually filed and proceedings in respect of the objection commence.

• Registration

If there are no objections raised, the mark is registered and the proprietor of the mark is then issued with a Trademark Certificate.

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

STEP BY STEP GUIDE ON BUYING LAND IN KENYA

All persons in Kenya can hold land in Kenya however, the Constitution of Kenya, 2010 under Article 65(1)provides that a person who is not a citizen may hold land on the basis of leasehold tenure only, and any such lease, however granted, shall not exceed ninety-nine (99) years. In the case of companies they are considered a citizen only if the body corporate is wholly owned by one or more citizens.

Any person willing to buy land in Kenya should follow the following steps below:

1. Parcel identification: The buyer in this case identifies the parcel of land which suits his/her needs, this being the acreage, location etc. at this point the buyer should take a further step to visit the physical location of the property to ascertain the boundaries, ensure that there are no occupants, to avoid instances of adverse possession.
2. Preliminary investigation of Title: The buyer should obtain copy of the Title to the property and conduct an official search which is a very important step in buying land in Kenya and should not be skipped. This usually involves lodging an official search at the lands registry depending on where the property is located, paying the requisite search fees which is usually Kshs. 520/=. The search results usually takes three(3) working days and they usually ascertain ownership and any encumbrances on the property. It is also prudent to conduct a search at the Ndungu Land Report to ensure that the parcel of Land is not listed as one of the illegally and irregularly allocated land. 
3. Preparation of the Sale Agreement: This is usually done by the Seller/Vendor's advocates. The Sale Agreement usually sets out the terms agreed between the parties. The buyer or if represented the buyer's advocates should ensure that they review the Agreement for Sale to ensure that the terms are favorable. The Sale Agreement usually contains the following terms i.e the description of the parties, purchase price, deposit, warranties, termination, completion, governing law etc. Once the parties have agreed on the terms, the same is engrossed and sent for execution by the purchaser then the vendor or their powers of attorney. Once executed nominal stamp duty is paid for the Agreement.
4. Obtaining the rates and rent clearance certificates where the same are applicable: Rent clearance property is usually obtained for leasehold properties only and rates clearance certificate is obtained for properties for properties in the municipalities.
5.  Preparation of the Transfer: This is usually done by the purchaser's advocates and reviewed by the vendor's advocates, and executed by both parties.
6. Obtaining the requisite consent to transfer: Depending on whether the property is agricultural or not,consent to transfer should be obtained. In the case of Agricultural land, the consent to transfer should be obtained from the relevant Land Control Board.
7. Valuation of the property and Payment of Stamp duty: Valuation of property in Kenya is usually done by a registered Government valuer. Once one lodges a valuation for Stamp duty application at the Ministry of Lands with the accompanying documents the valuer usually contacts the party and visits the site and values the property, a report is then compiled and the value is endorsed on the transfer and then assessment of stamp duty which is usually 4% of the value of the property located in the municipalities, for agricultural property it is 2% of the value of the property. Once payment is made the documents are lodged at the lands registry for stamping where the collector of Stamp duty is fully satisfied that payment has been made.
8. Registration formalities: Booking for registration of the transfer in favor of the purchaser. The Original Title, the transfer (in triplicate), land rent and rates clearance certificate(where applicable), consent to transfer, valuation for stamp duty form, the stamp duty declaration, assessment and pay-in-slip, PIN and IDs of the purchaser and vendor are lodged for registration.
9. Post registration search: This is a very important step after registration, to ensure that the transfer of the property in favor of the purchaser is ascertained.

NOTE: This is just a brief summary of the steps required in buying property in Kenya, if you require further assistance or information, do not hesitate to send an e-mail to legalserviceskenya@gmail.com