Filling Annual Returns for Companies
Section 705 of the Companies Act stipulates that each company must furnish the Companies Registrar with its annual returns, comprising the following particulars:
- Company name and registration number,
- Registered office address,
- Company type and principal business activities,
- Details of directors and secretaries,
- Financial statements or exemption statement if applicable,
- Information regarding share capital, share classification, corporate and/or natural shareholders, and the number of shares held by each,
- Details of indebtedness,
- List of both past and present members.
Every company is obligated to submit successive annual returns to the Registrar, each of which should be current up to a date not exceeding the company’s return date, its incorporation anniversary, or the anniversary of that date. The initial annual return following the company’s incorporation must be lodged precisely 18 months after the date of incorporation.
Annual return or form CR29; This is a company’s legal document that has to be filed with Companies registrar annually to show the current picture of the company. It outlines the company’s organizational structure, distribution of shares, division of shares, nominal capital, and details of directors and shareholders, including their names and addresses. Furthermore, it includes information about the company’s current registered office and the particulars of the company secretary, if any.
As per Section 125 of the Companies Act in Kenya, it is compulsory for companies with share capital to submit an annual return. This return must be filed once every year and must adhere to a specific format. Additionally, it should be submitted within fourteen days following the annual general meeting.
On which other occasion are companies required to file return (interim return)?
- When there is a change of company directors (Appointment/Resignation)
- When transferring shares
- Change of address of the Directors
- Change of share capital of the company
What are the consequences for failure to file annual returns?
When annual returns are not submitted, the following consequences may ensue:
- Requests such as the appointment and resignation of directors, transfer of shares, registration of debentures and charges, etc., shall not be processed by the Registrar.
- The company is also at risk of being struck off the register of companies.
- Upon conviction, both the company and any defaulting officers are liable to a fine not exceeding Kshs. 200,000, with an additional daily fine of Kshs. 20,000.00 until the situation is rectified.
What is the process of filing annual returns?
- Set up your eCitizen account. You can establish your eCitizen account by visiting www.eCitizen.co.ke and choosing the ‘create an account’ option.
- Connect your business – if it was registered prior to the migration to the eCitizen portal (2016).
- Submission & validation of the beneficial ownership information form.
- Lodging Annual Returns.
- Payment.
- Receipt issuance and processing of return filings.
Local Registered Address
Division II, section 19(c) of the Companies Act 2015, states that a company must have a registered office. The requirement for a locally registered address under the Companies Act 2015 holds several significances:
- Legal Compliance: Under the Companies Act 2015, every company registered in Kenya must have a registered office address within the country. This is a legal requirement to ensure that companies have a physical location where official documents and notices can be served.
- Communication: The registered address serves as the official point of contact for the company. It ensures that government agencies, stakeholders, and members of the public have a reliable address to communicate with the company.
- Jurisdiction: Having a local registered address establishes the jurisdiction of the company within Kenya. It clarifies the legal framework under which the company operates and is subject to regulations, taxes, and other laws applicable in Kenya.
- Transparency and Accountability: A local registered address enhances transparency and accountability by providing a visible location where the company conducts its business activities. This promotes trust among stakeholders and helps prevent fraudulent or deceptive practices.
- Accessibility: The requirement for a local registered address ensures that the company is easily accessible for regulatory purposes, such as inspections, audits, or legal proceedings. It facilitates the smooth functioning of regulatory processes and compliance checks.
Company Secretary
Who is a Company Secretary?
A company secretary is a senior position in a private company or public organization, normally in the form of a managerial position or above. They are the named representative on legal documents, and it is their responsibility to ensure that the company and its directors operate within the law.
The Position of a Company Secretary in the Companies Act, 2015 makes it mandatory for all public companies incorporated under the Act to have at least one Company Secretary. In addition, the Companies Act provides that there will be a mandatory requirement for a private company to have a company secretary only if it has a paid-up capital of five million Kenya shillings or more (Section 243). The Companies Act, 2015 further states the qualifications that must be held by a person who is appointed as Company Secretary of company with such person required to hold a practising certificate issued under the Certified Public Secretaries of Kenya Act. A director who appoints a Company Secretary without adhering to the qualifications set out by statute for the position is, upon conviction, liable to pay a fine of KShs. 200,000/- (Section 246).
What is the role and importance of company secretary in company law?
The Company Secretary serves as a guardian of compliance, a facilitator of communication between the board of directors and other stakeholders, and a custodian of corporate records. Despite the name, the role is not clerical or secretarial.
In summary, the Companies Act 2015 of Kenya underscores the indispensable role of a company secretary in ensuring regulatory compliance, facilitating transparent governance practices, and maintaining effective communication within the organization. Their appointment is instrumental in upholding legal standards, fostering accountability, and enhancing stakeholder confidence, thereby contributing to the overall success and sustainability of the company.
Annual General Meetings
What is an annual general meeting?
An AGM is a formal assembly where a company’s shareholders convene to discuss and decide on key matters pertaining to the organization’s management and financial health. It provides shareholders with a direct opportunity to interact with the board of directors, ask questions, and raise concerns.
Section 310 of the companies Act 2015, mandates that public companies must hold an annual general meeting within or by the end of the six months of its financial year. Private companies are not required to hold an annual general meeting, although they can elect to provide for them in their articles if they wish or if they are a traded company (a corporation whose shareholders have a claim to part of the company’s assets and profits).
Maintain Statutory Records
These include Register of Member/Directors/Secretaries, Minute Book, Certificate of Incorporation and Articles of Association.
Accounting Records ^ Financial Statements
Division 10, section 683 of the Companies Act 2015, directs that of a company shall lodge with the Registrar of companies annually for each financial year the financial statement, certain documents and reports required by section 686, 687 or 688. Companies must maintain accurate accounting records and prepare financial statements annually unless they qualify for an exemption as provided under the Companies Act.
Changes in the Company
Division 2, section 138 of the companies Act 2015, directs that of a company may undergo various changes such as the appointment or resignation of directors, changes in shareholding, and amendments to the company’s articles of association or registered office. These changes can also include alterations to the financial year-end. According to the Companies Act of 2015, companies are required to notify the Registrar of Companies about these changes. Failure to comply with this requirement can result in financial penalties for the company officials who violate the regulations.
Filing of Ultimate Beneficial Ownership
As of 2020, companies must comply with the Beneficial Ownership regulations by disclosing their Ultimate Beneficial Owners (UBO), creating a Register of Beneficial Owners, and submitting it to the Registrar of Companies. The Companies’ Registry has confirmed that the Beneficial Ownership Information is confidential and assured companies that their data will be kept private.
Employee Deduction
Employees’ salaries or wages are a very important subject especially when it comes to managing monthly deductions in Kenya. These statutory deduction figures and the other organization’s monthly deductions continue changing due to the country’s law amendments. The Employment Act of Kenya, Section 19(1), permits the employer to deduct any amount from an employee’s wage as a contribution to a fund or program that the employee has consented to support and that has been approved by the commissioner for labor. Among the fundamental statutory deductions are:
- PAYE (Pay As You Earn) under the Income Tax Act Cap 470.
- NHIF (National Hospital Insurance Fund) under NHIF Act Cap 255 and NHIF Act No. 9 of 1998.
- NSSF (National Social Security Fund) under NSSF Act No. 45 of 2013.
- NITA (National Industrial Training Authority) under the Industrial Training (Amendment) Act, 2022.”
- Housing levy under the Finance Act 2023.
Companies are urged to comply and file the necessary filings to avoid the above complications. As it has been repeatedly proven it is easier and more cost-effective to comply than to deal with the repercussions of non-compliance.
Conclusion
Compliance with statutory obligations is non-negotiable for companies. It is integral to maintaining legal standing, preserving reputation, and fostering trust with stakeholders. Prioritizing compliance safeguards against legal repercussions and ensures sustainable business operations.