Laws drafted to improve business

September 15, 2008
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, NAIROBI, September 15 – The Kenya Law Reform Commission on Monday presented several draft Bills to the States Law Office, which if enacted would see the country have a new legal regime that promotes investment.

The co-convenor of the law reform committee on company laws Mbage Ng’ang’a said if implemented, the Bills would introduce changes in colonial and archaic laws, which govern business operations in Kenya.

“There has been a clamour by the business community and the legal fraternity for the reform of our laws to take into account the considerable changes in business practices in a globalised economy,” he said.

The draft laws that were handed over to Attorney General Amos Wako included the Companies Act Bill; the Insolvency, Partnership and the Limited Liability Bill.

Ng’ang’a added that the piece meal reforms that had been undertaken over the years through sectoral legislation had at some point only served to create confusion and conflict with other existing laws.

“We have seen this particularly in the banking, insurance and the capital markets sectors,” he explained adding that this was one of the reasons they were undertaking the comprehensive review.

The current Companies Act was enacted in 1962 although it was borrowed from the United Kingdom version of 1948.

The proposed Companies Bill 2008 for example provides for single-member companies for entrepreneurs who would wish to form limited companies without having to take on shareholders.

It also provides for a simpler method of incorporating companies where the owner is only required to fill some statutory forms provided by the registrar of companies.

This is unlike the past where lawyers had to draft Memorandums and Articles of Association.

“It is possible to form a company by simply filling the forms. We are sure that the lawyers will still find some business to do even within the new Act,” Ng’ang’a said.

He added that part 6 and 11 of the Act provides for a comprehensive code of corporate governance which meets the tenets of the modern industry best practises.

This would ensure that business managers were more answerable to shareholders.

Part 18, Ng’ang’a added, provides for details and rules on mergers, takeovers and acquisitions and for the first time recognised the Capital Market Authority.

“Under the existing regime, there is no synergy between the CMA legislation and the Companies Act,” he added.

In a bid to protect the public dealing with limited liability companies, another part of the bill contains extensive disclosure requirements for the firms.

The business community has in the past complained that the current Bankruptcy Law has been geared to ‘kill’ businesses and receivers and liquidators were categorised as undertakers.

But in the proposed Insolvency Bill 2008, the taskforce recommended that that the insolvency provision be removed from the Companies Act.

It also proposes to make corporate rescue as the first alternative in dealing with insolvent firms.

“Although liquidation is not ruled out, this will be our last resort,” Ng’ang’a added.

The Bill also seeks to ‘professionalise’ the bankruptcy practise by recommending that only certain professionally qualified insolvency practitioners will be permitted to act as receivers, liquidators and trustees.

The existing Companies Act does not stipulate the qualifications for practitioners.

The projected Partnership Bill contains default clauses which shall apply if the parties involved don’t execute a formal partnership deal and provide for both general and limited partnerships.

In the current legal framework, the general and limited partnerships are dealt with in two different pieces of separately.

“This simplifies the formation of partnerships,” Ng’ang’a added.

He added that all stakeholders were consulted in the preparation of the drafts in keeping with the objective of involving the public in law reviews.

Wako instructed the commission and the Legislative Drafting Department to prepare a cabinet memorandum that would accompany the bills in the next 10 days so that he could present to the cabinet.

“The Bills fall under the AG’s mandate and I will therefore proceed with speed and ensure that I present them to Cabinet for approval,” Wako pledged.

The AG added that upon their enactment, the laws would create a framework that was devoid of red-tape and one that created a level playing field for investors and other entrepreneurs.

“The ultimate goal of all this is to make Kenya self-sustaining and a successful competitor in the global village,” he noted.

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