I trust we enjoyed the tax series and we are tax literate , if you just joined us click on the previous post to catch up with us.In the month of July we shall embark on a new series that is the Commercial Law series.
What is Commercial Law?Well ‘Commercial Law‘ is a broad term used to cover a wide range of legal services designed to support businesses in making money out of their products and services.Commercial law focuses on the sale and distribution of goods, as well as financing of certain transactions.
We shall narrow it down to 4 categories that will cover the weekly posts of this month.These 4 include;
- Whats new !
- Business Law for Entrepreneurs.
- Consumer Protection Law.
- Banking and Finance Laws.
The signing of the new business laws in Kenya by President Uhuru Kenyatta on
11 September 2015 will go a long way to improving Kenya’s attractiveness
as a Foreign Direct Investment destination (FDI). The new laws include the Companies Act, the Special Economic Zones Act, the Business Registration Service Act, the Insolvency
Act and the Finance Act 2015.
The Companies Act
The Act which mirrors the 2006 English Companies Act,replaces the pre-independence law introducing provisions that reflect the current business realities and technological advancements over the years.
Some of the interesting features of the Act include the “walking company” provisions, which allow single shareholder companies. The Act also simplifies the Memorandum of Association to allow companies to carry out any activities not necessarily included in their memorandum.Companies can also make written electronic resolutions, eliminating the requirement for members to physically meet all the time.
The Business Registration Service Act 2015 .
The process of registering a business in Kenya will be easier under
the Act.The Business Registration Service (BRS) is the new body that will administer the laws relating to incorporation, registration, operation and management of companies,
partnerships and firms, taking over from the State Law Office.
The Special Economic Zones(SEZ) Act 2015
The Act aims to promote the establishment of SEZs by providing tax and other incentives to licensed developers and operators. The SEZs are currently planned to be located in Lamu, where there will be a free port, Mombasa and Kisumu.
The activities to be carried out in these zones include Free Trade Zones(FTZ), Industrial Parks, Free Port, Information Communication and Technology Parks (ICT Parks), Science and Technology Parks, Agricultural Zones, Tourist and Recreational Zones and Business Service Parks. This is expected to spur economic growth in the country.
In 2017 the President amended the business law with new bills which include;Movable Property Security Rights Bill 2017,the anti-money laundering Bill,Finance Bill 2017 and The Insurance Amendment Bill.
Movable Property Security Rights Bill 2017
Borrowers are now allowed to use items such as machinery, furniture, vehicles among others as collateral in securing loans after the bill was signed into law .
The new law is aimed at widening the scope of business and entrepreneurship in the country by enhancing access to credit by micro, small and medium business owners who have been unable to provide fixed assets as security against credit facilities.
It also provides for the establishment of the office of the Registrar of Security Rights, which will facilitate the registration of security rights in movable property. This will provide a system that can be used by lenders, businesses and other practitioners in increasing secured transactions, access to credit and other forms of finance.
This bill comes after a 23% decrease in average lending rates following the Banking (Amendment) Act, 2016 which came into force on 14 September 2016.
The hardest hit by the interest rate capping has been the private sector which is dominated by the micro and small enterprises as commercial banks opt to lend to the government.
The anti-money laundering Bill
The Proceeds of Crime and Anti-Money Laundering (Amendment) Act, 2017, imposes stiff penalties on those found culpable in addition to identification, tracing, freezing, seizure and confiscation of the proceeds of crime.
The Act recommends that a person who fails to comply with the law be liable to a fine of not more than Ksh 5 million ($50,000), while the penalty for an institution will not exceed Ksh 25 million ($250,000).Money obtained from laundering has been allegedly used in East Africa to finance terrorism and drug trafficking!
The amended law adds that failure to comply with the law, an individual or institution will be liable to an additional penalty of Ksh 10 million ($100,000) a day for a maximum of 180 days.
The new legislation also formalizes the establishment of the Assets Recovery Agency, which will handle all cases of recovery of the proceeds of crime that come from money laundering.This Bill acts as a major tool in our sustained efforts to fight corruption. It means that no proceeds of theft and corruption are beyond the reach of the State.
Finance Bill 2017
The new bill imposes a uniform 35% tax rate on all gambling revenue – betting, gaming, lotteries and prize competitions.The Finance Act seeks to amend the law relating to various taxes and duties. It also seeks to amend the following laws among others;the Betting, Lotteries and Gambling Act (Cap. 131) to increase the tax rates from the currents rates to 35 per cent.
The Kenya Revenue Authority Act (Cap.469) is to include the newly introduced laws: the Tax Procedures Act 2015, the Value Added Tax Act 2013, the Miscellaneous Fees and Levies Act 2016 and Excise Duty Act 2015 as part of the revenue laws administered by the Kenya Revenue Authority.
The Stamp Duty Act (Cap.480) is to provide for tax neutrality for Islamic financial products to favorable compete with similar conventional products in Kenyan markets.
The Sacco Societies Act (Cap.490B) to define “deposits” and “deposit taking Sacco business” to take on board the principles of Islamic law in the Act as a form of recognition of Islamic Saccos.
The Insurance Amendment Bill
This Bill was submitted by the Cabinet Secretary for the National Treasury in line with the proposals announced in the Budget for 2017/2018.The objective of the Bill which is now a law seeks to amend the Insurance Act (Cap. 487) to harmonize the provision following recent amendment to the Act.
In particular it seeks to amend section 41 of the Insurance Act in order to prescribe the assets that shall not be included for the purposes of determining an insurer’s capital adequacy.
Further, it seeks to amend the Insurance Act in order to define what admitted liabilities are, a term which Insurance Act had not defined.
These are some of the new changes in commercial law that was vital to shed some light on.Although the new laws augur a lot of promise for businesses in
Kenya and the region, there is a need to be backed with political goodwill
and implementation to create an environment that ensures we achieve
the full potential of easing business in Kenya and promoting our attractiveness as an FDI destination.Especially with the elections coming up in a few weeks time lets keep our business environment in mind.
Remember the political aspirant you choose is also your law maker they will affect your money flow.Commerce is at the core of a democratic society and, in order to be strong economically, it must be attractive to businesses.