News & Insights

Land Law as the hero for Oil Production

As the reality of the complexities involved in oil and gas exploration and production set in, it is becoming apparent to both the government and the population at large that this newly discovered commodity in Kenya takes a whole lot of efforts to commercialize than previously hyped.
The first effort to build a pipeline for oil transportation in Kenya was frustrated when Uganda pulled out of the anticipated joint pipeline construction with Kenya, favoring Tanzania instead. In 2016, the government announced an early production to be effected through road transportation.
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10/11/2017

Ban on plastic bags first step in getting rid of marine litter.

At the Economist World Ocean Summit in Bali on February 23, UN Environment launched a revolutionary global campaign dubbed #CleanSeas to eliminate marine litter, including micro plastics in cosmetics and single-use plastic by 2022. According to the UN Environment’s statistics, more than eight million tonnes of plastics enter oceans each year.
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28/08/2017

How Pension funds can be managed to benefit contributors.

The only way Kenyans can reap full benefits from the Pension industry is if the funds are properly managed. A Pension fund is any plan or scheme which provides retirement income. The schemes mainly get their funds from employers’ contributions on behalf od employees and subsequently from the investments made thereof.
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03/12/2017

A guide to carrying on business as a foreign company in Kenya

Brief recap on what to look out for when dealing with a foreign company

a) Certificate of Registration in Kenya

b) Evidence of local representation

c) Physical office

Introduction

Though a lengthy piece of legislation, the Companies Act 2015 gives more clarity to foreign Companies wishing to set up or conduct business in Kenya than the previous Act.

With the abolishment of the requirement for 30% local ownership within a foreign company in the earlier draft, the current draft presents a more investor friendly regime that may see more international investments being directed to Kenya.

Registration Documents 

Under Section 974 of the Act, a foreign company commits an offence if it carries on business in Kenya without having been registered under the Act. The Law extends carrying on business to also mean the offering of debentures and /or guaranteeing debentures by a foreign Company.

This provision has a direct implication on foreign lending companies and local borrowers in that the borrowing due diligence will henceforth include confirmation with the Companies Registry as to whether the foreign company is locally registered.

Procedure of registering a foreign company in Kenya 

The application for registration is to be made to the registrar and effected by the registrar entering the company’s particulars in the foreign companies register. This application should be accompanied by a name under which the company wishes to carry on business in Kenya with, which can either be the original name or an alternative name.

The following documents are to be presented

a) A certified copy of the company’s certificate of registration from its original place of incorporation or the equivalent;

b) Certified copy of the company’s memorandum and articles of operation;

c) List of directors/shareholders and their personal details(if any of the directors resides in Kenya, a memorandum should be executed by the Company stating the powers of the local Directors);

d) If there is an existing Charge over the property of the foreign company, then documents that would have been registrable had the company been incorporated in Kenya need to be lodged with the Registrar;

e) Notice of address being either the office of registration or the principal place of business;

f) and Notice of the Company’s registered office in Kenya.

Upon registration the company will be issued with a registration number and a certificate of registration.

Local Representation/ Requirements

a) A foreign company may not be registered unless it has a local representative.

b) Particulars of the local representative are to be lodged with the Registrar of Companies such as the name and address.

c) The role of the local representative is to perform all the legal functions of the Company under this Act.

d) Other than the registered office, for the purpose of business, a foreign company must also lodge with the registrar particulars of its place of business.

e) The registered local office must remain open during all working days and hours.

f) The physical premises used by the company shall bear on the outside the company’s name, place of origin, the fact that it is a limited company and a notice to the effect that the building is the company’s registered office.

g) A foreign company is required to lodge financial returns every year which should be accompanied by a statement in writing and a statutory declaration verifying the truth of the statements.

28/02/2018

How to stave off the resource curse

Before we plunge into the rather uncertain future of oil production, which may otherwise seem promising, it is high time we paused as a country and gave consideration to the resource curse paradox as a serious omission in policy considerations so far. The resource curse paradox or the paradox of plenty is a perplexing concept in which most resource rich countries are unable to transform that wealth into improved livelihood for their population.
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02/10/2017

Q&A: ARE YOU A FOREIGNER AND WANT TO WORK IN KENYA? A
NUTSHELL OF KENYA’S IMMIGRATION LAW

Are you a foreigner and would like to work or are already working in Kenya? Here are critical questions that you need to ask yourself in order to comply with the immigration law regime in Kenya:-

Q1. Why Kenya as my preferred work place?
Kenya has over the years established itself as the regional hub for global corporations looking to establish offices in the East African region. Kenya has very limited or no restrictions on foreign investment, foreign ownership and repatriation of income, profits or
capital. The regulatory environment has been structured to ensure fair and equitable treatment of all foreigners.

Q2. Are there any restrictions on employment of foreigners in Kenya?
Under the law, foreigners working in Kenya are required to have a work permit or a special pass. The nature of documentation will largely depend on the duration of your stay in Kenya. A special permit is issued for duration of three (3) months-renewable once and a work permit is issued for duration of one (1) year to a maximum of two (2) years-renewable.

Q3 Does it matter how long my employment will last?
If you are on a work assignment that will last for less than six (6) months i.e. internships and short term contracts, it will be advisable to have a special pass. Where the work engagement exceeds more than six (6) months, you will be required to have
a work permit. It is always advisable to have a special pass before the work permit is processed where you are already in the country or are coming in soon.

Q4 Does it matter in which sector I work in?
Special passes are issued across all sectors. However, work permits are classified from class A to M depending on the sectors. For example, class A is issued to those engaged in minerals prospecting; class D is issued to foreign employees and class M is issued to
refugees who want to work in the country. Other employers may be exempt from special pass and work permit requirements for foreign nationals. This includes some diplomatic offices and government engagements.

Q5 Are there any costs of getting a work permit and special pass?

The governments costs of getting a special pass will normally be Kshs. 45,000/= while the cost of a work permit will vary from the class.
Work permits normally have a processing fee that ranges from Kshs. 1,000-10,000/= ($10-$100) and an annual fees of Kshs. 200,000/= ($2000). Additionally and additional bond of Kshs. 100,000 ($1000) may be required for work permit applications. Citizen for East African Community (EAC) member countries are exempt from any government fees. There is also need to factor in costs of lawyers and other agents who will assist you in obtaining work permits and special passes.

Q6 How long does it take to have the work permit and special passes processed?
It takes an average of 5 working days to obtain a special pass and 2-6 weeks to obtain a work permit after approval.

Q7 Are there any other approvals required except from the Department of Immigration
Kenya?
Depending on the sector, you may be required to obtain the approval of the regulator before a work permit can be issued. The sectors that mainly require the regulator’s approval include, but are not limited to: tourism, aviation and non-governmental organisations. Foreign national are also required to obtain current police clearance and approvals from Kenya or from their countries of origin.

Q8 How do I secure my dependents’ stay in the country?
Once you have obtained a work permit, you may apply for dependents passes to secure the stay of your spouse and children in Kenya. You may also apply for pupil passes in order for your school going children to study in Kenya.

Q9 Are there any consequences for working in Kenya without the proper immigration
documents?
Working in Kenya without a valid and unexpired work permit or special pass is a criminal offence prosecuted under the law and one can be deported from Kenya. 

Should you require any assistance and clarification, feel free to get in touch with Anaciata Mbula at ambula@osekoouma.com or info@osekoouma.com

01/03/2018

Growth of Islamic Funding in Kenya

For a country where Muslims make up 25% of the population, the late takeup of Shariah compliant financial products by the larger population is a worrying factor which should be addressed, if the country is to achieve the economic goals in its Vision 2030. Traditionally, financial services in Kenya have been dominated by commercial banks and other financial institutions devoid of religious affiliation. Christian financial institutions have existed but within the usual commercial banking principles.

Islamic Financing in Kenya
Banking in Kenya is regulated by the central bank under the Banking Act Chapter 488. There are several funding solutions in Kenya such as unsecured loans, secured loans and bonds. Since the commencement of Islamic banking in Kenya in June 2008, Islamic finance has grown from simple commercial banking to include equities and investment banking such as debt issuance, bonds and structured products. It has become accepted not only in Kenya but throughout East Africa.

There is no doubt that acceptance of Islamic banking into the law has become a major attraction for international investment within Kenya. Given this realization, Kenya has quickly adapted to the central role Islamic banking/financing plays in boosting the foreign investment climate.

As such, the country is working strategically toward positioning itself as the hub for Islamic banking within East Africa, and consequently putting East Africa on the global Islamic finance landscape. The approval and rise of Shariah compliant banks within the country, such as First Community Bank and Gulf African Bank, have prompted the country to rethink its laws on financing. Existing commercial banks such as the National Bank and KCB have also tailored Islamic compliant solutions as part of their core business.

In the 2017/2018 annual budget report for example, the focus of the country in Islamic banking was evident. In his statement, Cabinet Secretary for the National Treasury Henry K Rotich focused on various efforts geared toward boosting Shariah compliant banking.

Among the highlights was an admission that Islamic banking has become a major source of funding development expenditures globally. As such, Rotich proposed for a review of the Capital Markets Act, the Cooperative Societies Act and the Sacco Societies Act to facilitate Shariah compliant products. A review of the law governing savings and credit cooperative organizations (Saccos) is extremely remarkable given that currently, Saccos account for about 62% of personal savings in Kenya. Rotich has also moved on to issue regulations that facilitate the development of Takaful retirement benefits schemes in Kenya in March 2017.

In addition, a proposal was also made for the amendment of the Public Finance Management Act to provide for the issuance of Sukuk. Despite the clearance for such Islamic bonds within the 2017/18 Finance Bill assented to by the president, certain legal challenges such as the requirement to attach an asset to the bond have made it impractical for Sukuk to be issued for the current financial year. The government is, however, still targeting to raise billions in Sukuk, and is therefore actively working toward putting together transactional documents required for Sukuk to materialize.

The aforementioned reflects the serious commitment of the Kenyan government to make sure that the economy takes full advantage of Shariah compliant financing.

How Shariah compliant financing differs from commercial financing

The quick intake of Islamic finance products in Kenya is indicative of certain advantages offered in Islamic lending over commercial lending.

Unlike in commercial banking, under Islamic law money cannot be used to generate money, which negates the principle of accounts earning interest. Therefore, banks must purchase assets for every borrowing or deposit, which then generates income. This means instead of the bank issuing an interest on deposits, it shares with the depositor its profits in the purchased assets. Profitsharing
is therefore fundamental in Islamic banking and the same applies to income received from assets committed as security for financings.

The exposure of people to unpredictability and uncertainty over risks is not allowed. The sale of items that do not belong to one is also prohibited in Islam. This means that in case of a financing default, the liquidated assets are shared between the financier and the owner in accordance with their ownership ratio which keeps reducing on the part of the bank with every repayment made by the borrower. Due to this characteristic, this arrangement is commonly referred to as a lease rather than as a mortgage.

Given the foregoing, Shariah lending is likely to intensify within Kenya, and indeed within East Africa, stabilizing further the interest rates in financing.

07/02/2018