HIGHLIGHTS UNDER THE BUSINESS LAWS (AMENDMENT) (NO.2) ACT, 2021
HIGHLIGHTS UNDER THE BUSINESS LAWS (AMENDMENT) (NO.2) ACT, 2021
The Business Laws (Amendment) (No.2) Act, 2021 was enacted in to law on 30th March, 2021. The main objective of this amendment is to advance the process of doing business in Kenya. Some of the amendments have been brought about by the change in the Business environment due to the Covid-19 pandemic. The statutes that have been amended through this Act include:
i. The Law of Contract Act (Cap 23)
ii. Companies Act, 2015
iii. The Industrial Training Act (Cap 273)
iv. Stamp Duty Act (Cap 480)
v. The National Hospital Insurance Fund Act (Act No. 9 of 1998)
vi. National Social Security Fund (Act No. 45 of 2013)
vii. The Insolvency Act (Act No. 18 of 2015)
viii. Small Claims Court Act (Act No. 2 of 2016)
In this article we shall highlight some of the substantial changes that have been implemented.
THE LAW OF CONTRACT ACT
Execution of documents in land Transactions under the Law of Contracts Act.
Under the Law of Contract Act, the definition of the word “sign” has been amended to include execution of documents under section 37 of the Companies Act, 2015 which stipulates that a document is validly executed if it is signed on behalf of the company by either (i) two authorised signatories or (ii) by a director of the company in the presence of a witness who attests the signature. The amendment caters to transactions in the disposition of interest in land.
This now makes it easier for companies with an interest in disposition of an interest in land to execute documents signed by two authorised signatories or by a director of the company in the presence of a witness who attests the signature.
The Companies Act, 2015.
General Meetings
The Companies Act now recognizes General Meetings to include physical meetings or hybrid meetings.
In 2020 at the onset of the pandemic it was impractical to hold physical general meetings and with the various surges and phases with the pandemic, it has been vital that companies exercise some flexibility in holding General meetings affording all shareholders the opportunity to attend the meetings.
The Act has defined a hybrid meeting as “a meeting where some participants are in the same physical location while other participants join the meeting through electronic means including video conference, audio conference, web conference or such other electronic means.”
Virtual meeting is defined as “a meeting where all members join and participate in the meeting through electronic means…including video conference, audio conference, web conference or such other electronic means.”
The amendment further states that when providing notice of the General meeting on its website or otherwise, in the case of a hybrid or virtual meeting, the company should specify the means of joining and participating in the meeting.
Under the Transitional & Savings Provisions of the Companies Act, the requirements on the official seal of an existing company have now been deleted. The Act has eliminated the requirement of affixing a common seal in the execution of company documents as was required under the Companies Act sixth schedule, paragraph 11.
INSOLVENCY ACT.
Moratorium
Under section 638 of the Insolvency Act, Companies that are financially distressed are now eligible to obtain a moratorium per the eligibility guidelines provided under the Act. The term “Financially distressed” has not been defined under the Act, but it would mean a company that that is unable to generate sufficient revenue or income, making it unable to meet or pay its financial obligations.
Previously, companies that had an outstanding liability of one billion shillings or more in an agreement were ineligible for a moratorium. This provision has now been repealed.
The Act has added that when applying for a moratorium the directors should include a document setting out why a moratorium is needed and this document may include evidence that the company will assist in agreeing to an informal restructuring or other agreement with creditors or enter into a formal insolvency procedure which could lead to the rescue or efficient liquidation of the company.
Other notable amendments include:
INDUSTRIAL TRAINING ACT.
The Industrial Training Act has been amended to provide that the payment of training levies will be remitted at the end of the financial year of the business but not later than the 9th day of the month following the end of the financial year.
NATIONAL HOSPITAL INSURANCE FUND.
The National Hospital Insurance Fund has been amended to provide that a person shall pay the contribution to the board on the 9th day of each month and no longer on the 1st day of the month.
NATIONAL SOCIAL SECURITY FUND
It is now clearly defined under The National Social Security Fund Act that Mandatory contributions under the Act are to submitted on the 9th day of each month by the employers. Further, should the employer fail to make the payments on or before the 9th of the month, a sum equal to 5%of the amount of the contribution shall be added on the contribution each month or part of a month that the outstanding amount remains unpaid.
This blog post has been prepared by Georgette Thuku and Zaina Mbaruku.
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