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Only 14pc of SMEs Access Legal Services in Kenya Impeding Compliance Efforts

NAIROBI, Kenya, 29 Nov 20 –  Only 14 percent of Small and Medium Size Companies access legal services in Kenya, according to a new report by KIOI & CO Advocates.

The report that was released at the launch of the firm’s virtual legal services, indicated that over 70 percent of SMEs do not access legal services citing cost as the major factor. With over 100, 000 companies registered in Kenya every year, very few make it to their third birthday mostly due to compliance issues.

“According to the report, some of the major legal problems affecting SMEs include poorly drawn contracts or no contracts at all, little or no legal advice on agreements, bank loans as well as failure to meet compliance set by the law,” said Angela Kioi, founder, Kioi & Co Advocates.

“We also realized that SMEs are losing up to 20 percent of revenue on bad debts that they give up on instead of seeking legal redress to recover their money for services rendered,” added Angela.

The Kioi & Co virtual platform will see SMEs access legal services online without having to visit the law firms’ offices. Among the services being offered within the firm’s virtual legal suite include drafting and reviewing of contracts, debt collection, business registration as well as general legal advice.

The move comes even as the government continues to tighten legal requirements for business owners in Kenya.

The latest Beneficial Ownership Regulation gazettement by the Companies Registrar has notified all registered companies to update their beneficial ownership register by 31 January 2021, after which the Registry shall start enforcement of the same with a penalty of Sh 500, 000 for failure to comply.

The regulations shall apply to a beneficial owner who holds at least 10 percent of the issued shares in the company either directly or indirectly, exercises at least 10 percent of the voting rights in the company, holds a right to directly or indirectly appoint or remove a director of the company; or exercises significant influence or control over the company.

Data from the companies’ registry shows that the number of business names registered between July and September 2020 jumped 95 percent to 29,941 compared to a similar period last year. Compared to the quarter ended June, it means Kenyans registered an additional 9,649 companies between July and September—translating to an average of 326 new registrations daily.

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“We understand that for entrepreneurs, time is money, and their preferred mode of communication is virtual. This led us to explore how we can serve our clients better, ” she assured.

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