REVIEW OF THE BUSINESS LAWS (AMENDMENT) ACT,2020

The Government of Kenya in an effort to facilitate the ease of doing business, has made some amendments in the Law through the passing of the Business Laws (Amendment) Act, 2020. The Government has embraced the use of technology in various business processes and has also moved further to delete clauses that were restrictive. This Act could help reduce costs and time spent on certain transactions in Kenya.

The following is a comprehensive review of the changes in the Act and its impact on the cost of doing business in Kenya.

The Law of Contract Act

Section 3(6)- The definition of the word ‘Sign’ has been modified to include the use of advance electronic signature or physically.

Kenyans have been urged to work at home in order to facilitate social distancing which in effect will help prevent the spread of the Corona Virus.  The use of electronic signature in executing documents will help facilitate the ease of doing business transactions as people can carry out their activities from home.

Registration of Documents Act (Cap 285)

Section 2 of the Registration of Documents Act has been amended to embrace the use of technology. The definition ‘book’ has been amended to include ‘electronic book’ and the definition ‘signature’ has been amended to include ‘electronic signature’.
Registration of documents may now be done in physical or electronic form; further, the Registrar may establish and maintain the Principal and Coast Registries in electronic form to accommodate the new changes.
This development is important as the use of electronic documents will help facilitate businesses during this health crisis and advance the storage and safety of documents at the Registries.

Survey Act (Cap 299)

The Seal of the Survey of Kenya, as provided under section 5 has been amended to include an electronically processed document that bears a prescribed security feature shall deem to bear the Imprint of the Seal of Survey of Kenya.

Stamp Duty Act (Cap 480)

The definition of ‘Stamp’ in Section 2 has been amended to mean a mark embossed or impressed by electronic means or by means of dye, franking machine or adhesive stamp recognized by the government. The Act has also included electronic stamping as a valid way of stamping documents.
This is a key development as conveyancing and other business transactions can continue without a mishap from the Registries. This will help in ensuring transactions are seamless and efficient.

National Construction Authority, 2011

In 2019, there was an increase in the number of collapsed buildings that led to many Kenyans losing their lives and others being severely injured. The government through the National Construction Authority has made the following amendments;
The National Construction Act has been amended to include Building Codes and their enforcement in the Construction industry.
The Authority has been mandated by Section 23A to undertake mandatory inspections on construction sites to ensure the construction complies with all requirements.
Further, a penal section is inserted under section 23(3A) to provide sanctions to a person who fails to comply with an investigating officer. They shall be liable on conviction to a fine not exceeding one million shillings or imprisonment for a term not exceeding 3 years or both.

Land Registration Act, 2012

The definition of the word ‘instrument’ has been amended to include physical or electronic form.
Section 38 and 39, which provided that Land Rates Clearance Certificate and/or Land Rent Clearance Certificate are necessary documents for registration of a transfer, have been deleted. The onus falls upon a purchaser to ensure that the vendor of the property has paid all the land rates and land rent in respect of the property as the Land Registrar will not demand proof of payment of land rates and land rent in order to register a transfer in respect of a property.
The Act further abolishes the requirement to obtain any consent that may be required from the national government or county government in respect of leasehold properties. This will go a long way in reducing the time, cost and expenses incurred while obtaining the consents.
Section 44 has also been amended to provide that instruments can now be executed electronically by way of an advanced electronic signature, and this shall be deemed to be a validly executed document.

The Companies Act, 2015

The provisions under Section 35, 37,38, 42 and 43 which provided that a company seal is mandatory in carrying out the businesses of the Company have been deleted. This means that companies need not have a company seal to effect their transactions and businesses. This is a welcome amendment which reflects modern-day practice in developed jurisdictions.
A document, contract or deed will be considered to be validly executed by a company if it is signed on behalf of the company by two authorized signatories or by a director of the company in the presence of a witness who attests the signature.
Section 504 is amended to provide that a company with its bearer shares is in issue shall ensure that the share is converted into a registered share. Bearer shares are unregistered equity securities owned by the possessor of the physical share documents. Their use worldwide has reduced because they incur increased costs and are convenient instruments to secure funding for terrorism and other criminal activities. The Companies Act, 2015 prohibits the issuance of bearer shares.
This is notwithstanding what the company’s memorandum or articles of association provides. The company needs to notify the Registrar within 30 days of such conversion and the rights attached to the bearer share shall not be exercised until the bearer share is converted into a registered share.

The Insolvency Act, 2015

The Act has enhanced creditors protection as a creditor has a right to request information from an insolvency practitioner in respect to a company which is under administration. This information should be provided within 5 business days or such longer period as may be agreed upon between the creditors and insolvency practitioner.