Companies face deregistration and other sanctions for failing to disclose the identity of secret shareholders, including names and residential addresses, in the latest effort to curb corruption involving public tenders.
The Treasury, in disclosures to the International Monetary Fund (IMF), says that the Business Registration Service (BRS) has been conducting outreach activities to emphasise the obligations of companies, including the submission of beneficial ownership information.
BRS, a State agency in the office of the Attorney-General, oversees the process of disclosing companies’ beneficial owners.
“Following the outreach activities, BRS will strike off companies from the company register for non-compliances,” says the Treasury in documents shared with the IMF as part of conditions to tap loans.
The Treasury discloses that BRS has also designed its system to prevent companies from accessing any online services offered by the BRS until they comply.
BRS is also preparing draft amendments to the Companies Act 2015 to give it administrative sanctioning powers to deal with companies that fail to timely submit beneficial ownership information.
The sanctioning powers will be a departure from the current practice where only criminal sanction is permitted under the law, limiting the range of sanctions that can be imposed.
A company and each officer that fails to comply with the requirement to submit the beneficial ownership information is currently liable to a fine not exceeding Sh500,000.
But compliance with the Beneficial Ownership Information Regulations of 2020 has been low despite the push by the BRS and the Treasury.
The Treasury last year issued a circular reiterating the requirements for public procuring entities to publish beneficial ownership information as part of the publication of contract awards in the Public Procurement Information Portal (PPIP) but compliance has remained low.
As at end of May 2023, only 1,476 contracts worth Sh77.9 billion had beneficial ownership information published through the PPIP.
The Treasury has promised the IMF that the Public Procurement Regulatory Authority (PPRA) will this year start publishing quarterly reports on the status of compliance by the reporting entities.
The PPRA in January conducted a one-off review to assess compliance with the beneficial ownership disclosure requirements by public procuring entities.
“The review revealed a low level of compliance by public procuring entities despite various interventions by the authorities,” said the Treasury.
The law requires new firms to fill the Beneficial Ownership Information E-Register at the companies’ registry ahead of registration and existing firms to comply within the set timelines in a major shakeup of shareholder records.
Companies filing beneficial ownership information are required to first identify who their beneficial owners are before giving notice to the person it has identified as the beneficial owner.
The beneficial owners are then required to provide details to the registrar including their names, KRA PIN, ID or passport copies, postal address, residential address, occupation, telephone number and the date when they became beneficial owners.
A beneficial owner of a company is an individual with control over an express trust or on whose behalf an undertaking takes place.
A person holding at least 10 percent of the issued shares in a company directly or indirectly is a beneficial owner alongside persons who exercise at least 10 percent of the voting rights in a company.
Persons who hold a right to appoint or remove a director of the company and those exercising significant influence or control also rank as beneficial owners.
Besides fighting graft and conflict of interest, the disclosures on beneficial owners are supposed to reveal investors using nominee accounts to side-step ownership limits in firms listed on the Nairobi Securities Exchange.
The regulations are also aimed at curbing money laundering by revealing the true identity of investors owning large blocks of shares in both private and listed companies, who are also of interest to the taxman.
