More than half of the 794,741 registered companies in Kenya risk delisting for failing to disclose the identities of their secret shareholders who control more than 10 percent stakes in the firms.
As of last week, 50.28 percent or 399,595 registered companies had not revealed the details, including names, phone numbers and residential addresses, of the beneficial owners to the Attorney-General through the Business Registration Service (BRS).
The firms must disclose the secret shareholders by November 30 or risk deregistration.
The details required for filing include names of the substantial shareholder, Kenya Revenue Authority (KRA) PIN, national ID or passport copies, postal address, residential address, occupation, telephone number and the date when the investor became a beneficial owner.
Most high net worth shareholders at the Nairobi Securities Exchange (NSE) hold shares through nominee accounts, with the list of top 10 shareholders in a majority of blue chip firms dominated by anonymous investors.
“49.72 percent of private limited companies have complied with the requirement to submit a copy of their beneficial ownership register,” Joyce Koech, the registrar of companies, told the Business Daily in emailed responses last week.
“As of October 24, 2024, the total number of private limited companies registered in our index of entities is 794,741, and these are being actively monitored for compliance. Whereas the number of LLPs registered in our index of entities is 3,988.”
The fresh regulations bar companies from making public the personal details of the beneficial owners, but opens the window for the KRA, security agencies and the Financial Reporting Centre to tap the information.
This is a pointer that the State is keen to use the information to track money launderers, corrupt individuals and tax cheats via the data.
The burden of providing the details to the State rests with companies, who risk a fine of Sh500,000 and penalty of Sh50,000 for every day in breach.
Firms have been empowered by the regulations to stop paying dividends, block share transfers and withdraw rights for board appointments as well as voting power to substantial investors who fail to provide their particulars for forwarding to the State.
The BRS opened the beneficial ownership information e-register on October 13, 2020, in line with new regulations that required all firms registered under the Companies Act to prepare and submit copies of the beneficial ownership register to the registrar’s office.
Private companies and LLPs are mandated to prepare and maintain a register of beneficial ownership at their registered office/premises and submit a copy of the same to the registrar of companies.
LLPs are currently only required to prepare and maintain the beneficial ownership information at their registered address as submission of the data to the registrar is yet to commence in the absence of an e-register for the partnerships.
The BRS wants all private limited companies to comply with the disclosures by November 30, 2024, while the compliance timelines for LLPs shall be set after the activation of their e-register link.
Entities must also disclose changes to beneficial ownership information to the registrar within 14 days or face an administrative fine of Sh2,000.
The Registrar of Companies has attributed the modest compliance rates of the disclosures to a combination of low awareness levels and the proliferation of dormant entities.
“The awareness level and concerns about potential legal repercussions are significant reasons for non-compliance. Additionally, some entities are dormant, but they have not acted to notify the registrar to have the companies struck off and removed from the register,” said Ms Koech.
“Nevertheless, we are actively working to address these challenges through ongoing public education and sensitisation efforts. Promoting a clear understanding of these obligations is key to improving compliance rates.”
The requirement for filing beneficial ownership information seeks to cover risks of the entities being misused to facilitate criminal activity such as corruption, money laundering, financing of terrorism and the proliferation of tax evasion.
The government is relying on the disclosures to enhance the transparency of beneficial ownership in public procurement.
Procuring entities, including ministries and State departments, are obligated to upload awarded contracts containing beneficial ownership information to the Public Procurement Information Portal (PPIP).
The requirement forms part of conditionalities attached to the running multi-year loan programme between Kenya and the International Monetary Fund (IMF).
The BRS says it has undertaken interventions to incentivise disclosures by private firms and LLPs including streamlining the compliance process, providing a portal for disclosures through the eCitizen platform and zero rating the cost for filing.
The BRS has additionally shared step by step guides and tutorials on its platforms on how to file beneficial ownership information.
“In line with our commitment to fostering compliance, we are intensifying stakeholder engagement and public awareness campaigns. These efforts aim to ensure that all required entities fulfil their obligations and comply before the upcoming deadline,” Ms Koech said.
