Registered Venture Capital Companies Regulations

Sep 19, 2021 | Capital Markets Authority

A person that intends to operate under the venture capital sphere is generally registered under the Companies Act. However, that does not designate it as a “registered venture capital company” because it only takes effect upon registering it as a “venture capital company” by the CMA. An entity intending to operate as a venture capital firm will require to have a paid-up share capital and minimum fund of at least Kenya Shillings one hundred million apply to the CMA for approval upon meeting the required preconditions and will not change its shareholders, directors, or fund manager unless CMA provides a letter of no objection.

A fund manager must ensure there is a prudent investment policy for each fund, investments are made according to the disclosed investment policy, and in compliance with the applicable laws and regulations. The fund manager will provide continuous reports as per the regulations.

The venture capital company cannot raise funds through public offer; instead, it is required to provide a placement memorandum to CMA at least thirty days prior to publication and, if approved, provide returns on funds raised to the CMA within fourteen days after close of the offer.

CMA may deregister a registered venture capital company as per the request of the registered venture capital company or if its practices are inconsistent with the binding laws and regulations. In the event of such deregistration, CMA will notify the Commissioner of Income Tax within five days and Gazette the deregistration within thirty days. The requirement for CMA to notify the Commissioner of Income Tax is due to the special legislation referred to as the Income Tax (Venture Capital Company) Rules.

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