By Terry Otieno
The President on 18th March 2020 enacted into Law the Business [Amendment] Act, 2020 (referred herein as the Act) so as to amend certain statutes with the aim of enhancing the ease of doing business in the Kenya. The Act will help reduce any constraints faced during business such i.e. costs and time making such transactions more efficient. The following are the salient amendments occasioned by the Act.
Law of Contract Act (CAP 23)
Before the Amendment Act, section 3(6) defined a sign as marking one’s name or initial on an instrument with the Amendment Act section 3(6) has been amended to include an electronic signature as part of the definition of the word sign.
The advantage of this amendment is that execution of documents has been made more efficient, parties will be able to sign their contracts from anywhere and still maintaining the legality of the contract. The situation before with regards to electronic signatures was that, the instrument being signed was to be notarized.
- Companies Act (2015)
The Amendment Act abolishes the requirement of company seals in contracts made by companies, documents executed on behalf of companies, use outside of the country and sealing of share certificates. The effect of this is that any documents or contract executed by a company will be valid if the execution is by two authorized signatories or directors of the company, all made in the presence of a witness.
The Amendment Act amends section 504 to the effect that bearer shares have been abolished. These are unregistered securities owned by the person who is possession of the physical share documents. The demerit of this is amendment is that bearer shares that have already been issued would be converted to registered shares in 9 months after the Amendment Act has been passed.
Moreover, the Amendment Act has amended section 611 of the Act to raise the threshold for squeezing-in and selling-out of shares in a company to control from 50% to 90%. The merit of this amendment is that it will protect minority shareholders from majority shareholders who have the intention of acquiring their shares.
- Insolvency Act (2015)
Section 560A has been amended to provide that the court shall take into consideration the perishability of a movable asset and whether or not the movable asset is being used to maintain the company as a going concern before lifting a moratorium to protect secured creditors rights by providing clear grounds for relief from the stay within a specified time limit.
Additionally, the Amendment Act provides for a creditor requesting for information to be processed in 5 days. The effect of this is that this provision will enforce creditor’s rights to request for information on a company put under administration from an insolvency practitioner.
- Land Registration Act (2012)
Section 2 of the Act is amended to include new definitions as:-
- Advanced electronic signature means an electronic signature which is
- Uniquely linked to the signatory;
- Capable of identifying the signatory;
- Created using means that the signatory may maintain under his or her sole control; and
- Linked to the data to which it relates in such a manner that any subsequent change, to the data may be detectable.
- Electronic signature means data in electronic form affixed to or logically associated with other electronic data which may be used to identify the signatory.
- Seal includes an electronic seal.
- Signature includes an advanced electronic signature, an electronic signature, a mark or writing ones name or initials, making ones initials on the instrument as an indication that one intends to bind himself or herself to the contents of the instrument.
- Instrument is amended to include an instrument both in physical or electronic form.
Section 38 that provides for the requirement to produce a land rent clearance certificate, a land rates clearance certificate and section 39 a consent before the Land Registrar can effect registration of an instrument of transfer of land, is deleted in its entirety. The effect of abolishing these provisions is that it will be upon the purchaser to ensure that the vendor of the property has paid all the land rates and land rent in respect of the property. Additionally reduce the time and cost incurred to obtain the necessary consent from the government.
Moreover, the Amendment Act amends section 44 and 45 of the Act to provide for use and recognition of electronic signatures in the execution of land documents.
- Registration of Documents Act (CAP 285)
Section 4 of the Act did not include filing of documents in an electronic form, the Amendment Act amends this to state that a person may register a document by filling it in a physical or electronic form. The upside is that registration of documents would be very efficient however the necessary digital platforms are yet to be put in place so as to allow electronic filing.
- Survey Act (CAP 299)
Section 2 on definition of sign has been amended to include the definition of advanced electronic signature. Section 30 (1) stated that all the documents to be physically deposited in the Survey Office the Amendment Act amends this to allow the Director to receive plans and records either physically or electronically. Moreover, section 32 has been amended to incorporate the electronic affixation of the Seal of the Survey of Kenya.
- Stamp Duty Act (CAP 480)
As per the Act section 2 on definition includes a stamp embossed or impressed by means of a dye or a franking machine, or an adhesive stamp, the Amendment Act amended this to include a mark embossed by use of an electronic means. This amendment is an advantage that will speed up registration of proprietary rights without the strenuous procedure of filing on E-Citizen, paying through a bank and availing the necessary receipts to the Land Registry.