Foreigners as Shareholders in Kenya – Ong’anya Ombo Advocates

Shareholder: Introduction

The Companies Act No. 17 of 2015 (the “Companies Act”) had introduced a new requirement that a foreigner who intends to register a company in Kenya, should give at least 30% of the shares to a citizen of the Republic of Kenya. After extensive deliberations on the impact of the provision towards Foreign Direct Investment, the provision was amended by deleting that requirement. However, that does not mean that a foreigner has the freewill to form any business entity and become a sole shareholder.

According to other laws of the Republic of Kenya, that particularly fall under the Financial Institutional Sector, either directly under the supervision of the Central Bank of Kenya or Capital Markets Authority.

The Capital Markets Authority

Foreign Investor: The Capital Markets Authority (the “CMA”) through its Regulations, it provides that an Issuer will reserve at least 25% of its listed or shared intended to be issued under Initial Public Offering or Follow Public Offering for local investors. Local Investors refers to citizens of the East African Community Member States. The reserved shares can be allotted to Foreign Investors after approval by the CMA.

Ownership of a Derivative Exchange: At least one of the owners of a Derivative Exchange will be a Citizen of the Republic of Kenya, and at any time, at least 15% the paid-up equity share capital of the company shall be held by the Citizen(s).

Mining Act

Large Scale and Strategic Mining: In the event of large scale and strategic mining, the Government of Kenya will have the right to 10% free carried interest in the share capital.

On small scale operations, the licensing will only be issued to citizens of Kenya or company whereby 60% of the shares are held by a Kenyan.

A mineral dealing company that has 60% of the shares held by Kenyans will be issued with an operation license.

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