Amendment to Law of Contract Act
A proposal has been tabled before Parliament to amend the Kenya Law of Contract Act, which, if passed, will require creditors to first realise the security of debtors before instituting a suit against a guarantor to a loan. This proposal offers added protection to guarantors, and comes amid increased cases of lenders taking over guarantors' property at first instance when a lender defaults on a loan.
Big 4 Agenda with a focus on the affordable housing initiative
The Government of Kenya has announced plans to deliver 500,000 affordable housing units across the 47 counties as part of its Big 4 Agenda. The Big 4 Agenda is the country's strategic plan for the years 2018 to 2022 and focuses on enhancing manufacturing, food security and nutrition, universal health coverage and affordable housing. It is in line with the Third Medium Term Plan (2018 – 2022) towards the country's economic blueprint to achieve middle-income status, Vision 2030.
These plans are driven by the need to address the middle to low-income housing deficit in the country, which is estimated to stand at over 200,000 units annually. The government will engage both foreign and domestic contractors in engineering procurement and construction (EPC) contracts to construct the housing units. It will also seek investment from the private sector to fund this initiative, which will account for an estimated 60 per cent of the total funding of the initiative.
As a further source of funding, the government introduced a National Housing Development Fund in 2018 (the Fund), which requires employers and employees to remit mandatory contributions from employees' salaries to a maximum of KES 5,000 a month. This requirement has been challenged in court and held in abeyance pending the hearing and determination of a court case filed by the Central Organization of Trade Unions. The formation of the Advisory Board to the Fund has also been suspended pending the outcome of separate courtroom proceedings.
Proposal to require details of corporate beneficial ownership
The Attorney General is proposing to introduce a series of regulations that will require companies to provide particulars of their beneficial owners in the company's register of members. The beneficial owners of a company are the natural persons who either own, control or benefit from the transactions of a company.
Once lodged with the Companies Registry in Kenya, this information will be available to the public for inspection, promoting transparency and discouraging the evasion of local shareholding requirements in regulated industries. It will also provide useful identification information to competition regulators and the country's revenue authority.
Amendment to the Capital Markets Authority Act (CMA Act) to incentivise person(s) to provide information on stockbrokers who breach their contractual obligations
The CMA Act has been amended to introduce a provision that provides financial rewards to persons who provide information that leads to the recovery of funds lost through stockbrokers who breach their contractual obligations. In the recent past, the Capital Markets Authority (the CMA) has issued fines and other penalties to companies and even banned directors from holding office in publicly traded companies for failure to comply with the regulations governing the industry. It is hoped that the renewed efforts of the CMA to ensure the markets remain fair will increase growth of the capital markets in the country following years of slow growth. It is also intended to curb the practice of insider trading.
Nairobi International Financial Centre
The government hopes to establish a regional financial hub that mirrors the Doha International Financial Centre to encourage major economic growth and to position Kenya as a prime financial centre in the region. The country passed the Nairobi International Financial Centre Act (the Act) on 16 August 2017, which was a key step towards seeing its vision coming to fruition. The Treasury has also recently invited bidders for key consultations that will inform its decisions with regard to this project.
A financial centre usually aims to create an enabling legal environment to attract both foreign and local investors to the country. This usually involves having enabling company law, trust law, insurance law, as well as banking and tax regulations, with a view to attracting investors. Importantly the tax regime has also been changed to make it more favourable than that of other countries in the region. International finance centres have been successful in many major cities, including Frankfurt, Hong Kong, Johannesburg, London, New York and Zurich, among others.
Dentons takes this opportunity to thank Dr Daniel Wanjau Muriu, Lorna Mainnah, Andrew Njau and Sonya Syan of Dentons Hamilton Harrison & Mathews for their contribution to this month’s newsletter.