Disclosure of Beneficial Ownership of Companies in Kenya: an Analysis of the Legal Framework

Abstract

Disclosure of Beneficial Ownership is a significant tool that is able to be used to uncover criminals who employ various techniques to make vague their ownership and control of their illegitimately obtained assets. Because of the importance of disclosure of beneficial ownership, many states across the globe including Kenya have incorporated the concept in their legal framework. The Companies Act mandates each company to have a register of its beneficial owners. It is a requirement for companies to enter in the register information of their beneficial owners as provided by the regulations and to file with the Registrar the register within thirty days after conclusion of its preparation. It is also a requirement for companies to file with the Registrar changes to their beneficial ownership except the listed companies. The law on disclosure of beneficial is not effective. The quality of the information disclosed is not guaranteed as there are no devices in place to verify the information. The disclosure regime also raises privacy issues as the information sought to be disclosed is private information which is protected under the Data Protection Act. How such information will be made publicly available without infringing the right to privacy is a big challenge. Noncompliance with disclosure requirements attracts sanctions. These sanctions are too lenient to effectively deter noncompliance. When fully executed, the disclosure of ownership regime and the public register will be a commanding tool for investigators, public regulators and presses to expose conflicts of interest and corporate malpractices. This will provide a much-needed base in the battle against corruption and other corporate misuses. However, there is a genuine need for reforms to increase the effectiveness of the disclosure regime and compliance.