Introduction

In October 2020 the Companies Registry introduced a mandatory requirement for all companies to keep and maintain a register of their Ultimate Beneficial Owners (UBO). Following this, we did the first of a series on the Beneficial Ownership Regulations where we looked at who a Beneficial Owner is, what particulars are required to be recorded in the UBO Register and the penalties for non-compliance.

Slightly past the 2-year mark and after a long pause, we delve in to the 2^nd part of our series where we look at why UBO declaration matters. I mean isn’t it just another regulation to comply with? Another hurdle to achieving an ease of doing business? Or better yet an extra cost to incur? Why is it important?

A recap

A Beneficial Owner is any natural person who ultimately owns or controls a legal person or arrangements or on whose behalf a transaction is conducted. This includes persons who exercise ultimate effective control over a legal person or arrangement.

However, the requirement to declare and maintain a register of UBO only applies to beneficial owners who:-

• Hold at least 10% of the issued shares of the company either directly or indirectly;
• Exercise at least 10% of the voting rights in the company;
• Hold a right to directly or indirectly appoint or remove a director of the company; or
• Exercise significant influence or control over the company (whether directly or indirectly).

You can access the full article through this Beneficial Ownership Information

Why it matters

• To know who you are dealing with and understand whether the involved parties have any ties to criminal operations. Declaration of UBO helps organizations mitigate potential risks that could arise from unknowingly engaging with entities with criminal ties. These risks include reputational damage.

• To counter Money laundering, financing of terrorism, illegal arms dealings, and proliferation financing;

• To promote transparency in tendering. Corruption has become rampant in the procurement and tendering process most especially in Government where public officers award themselves government tenders through proxies;

• The cost of non-compliance isn’t cheap. Failure to comply with the disclosure and filing requirements of Beneficial Owners is an offence under the Companies Act that on conviction attracts a penalty of up to Kshs 500,000 (approx. USD 4,800) on each officer liable and a further KES 50,000 for continued non-compliance for each offence.

If you would like to discuss this further, please get in touch or contact Bernard Kiragu on info@scriberegistrars.com.