By Etaarifa Contributor
President Uhuru Kenyatta has signed into law the Special Economic Zones Act, the Company Law Act and the Insolvency Act, aimed at improving the ease of doing business.
The Companies Act of 1948 has effectively been repealed and replaced by the Companies Act of 2015 which simplifies the process of registering and running a company. Specifically, a single entrepreneur now has the capacity to form a private company as the sole member and director. The former Companies Act of 1948 required a minimum of 7 persons and 2 persons for the formation of a public and private company respectively while every company had to have at least one secretary. A private company will now not be required to have a secretary, unless it’s paid up capital is or exceeds Ksh. 5 million.
A simplified articles of association also allows for Small and Medium Enterprises to formalize more readily. Company directors will however have greater fiduciary duties and responsibilities. A provision has now been made for publicly listed companies to undertake share buybacks.
The Company’s Act 2015 is expected to significantly reduce the cost of doing business thus making Kenya more competitive. The Act provides criteria for determining a director’s fitness while the company is a going concern and when it becomes insolvent.
The Insolvency Act 2015 is styled around the U.S. Chapter 11 and allows for organized restructuring of insolvent companies. Specifically, it gives priority for revival of distressed firms rather than auctioning or liquidating them. Under the Insolvency Act 2015, troubled companies will have a chance to implement survival measures before receivership is resorted to. All receivers will be required to be licensed.
The Special Economic Zones (SEZ) Act 2015 ensures businesses have access to both the domestic and international market while enjoying certain benefits. It is thought to be critical in increasing capital inflows while facilitating the transfer of technology, development of capacity and creation of employment. The SEZ Act 2015 will provide an enabling environment for economic and business activities in areas designated as Special Economic Zones. It further spells out specific emphasis on openness, competitiveness and accountability within the SEZs while providing the regulatory framework within which the licensed SEZ enterprises, developers and operators will operate.
Kenya still ranks lowly in the global doing business index, having been ranked at position 119 out of 189 countries by the World Bank. However, the entry of the new laws could see investors have an easier time while operating in the Kenyan economy.