Nowhere to hide for shadowy company owners

All companies have until January next year to submit to the government names of their key owners or controlling entities.

This is a move to enforce the law and create transparency in shareholding of firms as the State cracks down on illicit cash flows such as money laundering and terrorism financing.

Business Registration Services (BRS) Director-General Kenneth Gathuma granted companies up to January 31, 2021 for preparation of beneficial ownership registers.

The registers are important as they help distinguish real businesses from shell companies and those in illicit activities.

“The Beneficial Ownership Register will create greater transparency in the ownership of companies in Kenya and support the government in the fight against corruption, money laundering and financing of terrorism,” Mr Gathuma said in a statement.

He said companies should register within 30 days of the register’s preparation and notify the registrar within 14 days of any change in ownership information.

“Failure to comply with this requirement makes it an offence to the company and every officer of the company who is in default,” the notice said.

Companies have been known to have major shareholders listed under nominee accounts whose beneficiaries are hard to trace.

BRS is mandated to oversee operations of the Companies Registry and the overall implementation of the Companies Act, 2015 which operationalised the Beneficial Ownership E-Register.

The Companies Act, 2015 and the Companies (Beneficial Information) Regulations, 2020 require all firms registered under the Act to keep a register of beneficial owners and lodge the same with the Registrar of Companies.

Failure to comply may lead to the company and each officer in default being fined up to Sh500,000.

According to the Act, a beneficial owner holds at least 10 per cent of the issued share of the company, exercises at least 10 per cent of the voting rights, can appoint or remove a director or has much sway in control of the company.

Details required by the State for the beneficial owner include full names, birth certificate number and ID card number.

Contacts, occupation or profession, nature of ownership or control and details as to when they became or ceased to be beneficial owners are also required.

Experts such as KPMG, however, say implementation of the law may face challenges.

“For instance, we note that companies are required to take reasonable steps to identify their beneficial owners. The challenge with such a requirement is that it leaves a lot of leeway for interpretation as to what constitutes ‘reasonable steps’,” said the global tax firm in an analysis of the beneficial information regulations.

“This requirement may therefore not effectively impact on the objective of the regulations.”

A report by the Tax Justice Network says this year 81 jurisdictions have laws requiring beneficial ownership to be registered with a government authority, up from 34 in 2018.

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