The entire Companies Act, 2015 (the Act) became operational on 15th June, 2016, pursuant to Legal Notice No. 109 of 2016. Prior to this, the Act was partially operational. Notably, one of the sections that became operational on the said date was Section 975 regarding the procedure for registration of foreign companies and which required that an application for the registration of a foreign company must demonstrate that at least thirty percent (30%) of the company’s shareholding is held by Kenyan citizens by birth. As discussed in our earlier alert, this provision was controversial for the reason that it discouraged foreign direct investment. The implication of this was that (foreigners and) foreign companies seeking to invest in Kenya could mainly realize this through wholly owned subsidiaries as opposed to branches and direct foreign investment. By way of Section 85 of the Finance Act, 2016, the thirty percent (30%) local shareholding requirement for foreign companies has been repealed, effective 1st  January, 2017. The said Section amended the Act by deleting the provision imposing the thirty percent (30%) local shareholding requirement in respect of foreign companies. It is our view that this amendment will be warmly received by foreigners looking to invest locally and will further open up the Kenyan business frontier by simplifying entry into the local market.

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If you have any questions relating to shareholding for foreign companies, please contact our lawyers below. For our insights on the Act, please click here