Registration of a private Limited Company in Kenya

Unlock the advantages of a Private Limited Company in Kenya! Enjoy limited liability protection, business stability, and perpetual succession. Learn about the key legal foundations, such as the customizable Articles of Association, essential for governance. Explore the seamless registration process, minimum requirements, and how CM SME Club can assist in safeguarding your company's interests.

Introduction

According to the Companies Act 2015, a Private Limited Company is a company whose articles restrict a member’s right to transfer shares, prohibits invitations to the public to subscribe for shares of the company, limits the number of members to fifty, and requires the consent of all members to add a new member.

A company can either be limited by shares or guarantee. A company limited by shares is one where there is a share capital and the shares are held by the shareholders. The liability of its members is limited to any amount unpaid on the shares held by the members. A company limited by guarantee on the other hand does not have a share capital; the liability of its members is limited by the company's articles to the amount that the members undertake, by those articles, to contribute to the assets of the company in the event of its liquidation.

Why opt for private limited company?

One of the primary advantages of forming a private limited company in Kenya is the limited liability protection it offers to its shareholders. Shareholders' personal assets are generally shielded from the company's debts and liabilities. This means that, in the event of financial losses or legal claims against the company, shareholders' personal assets such as homes and savings are usually not at risk. This limited liability protection provides peace of mind to investors and entrepreneurs.

A private limited company is considered a separate legal entity from its shareholders. This separation allows the company to enter into contracts, own assets, and engage in legal proceedings in its own name. This enhances the company's ability to conduct business and provides a more stable and enduring structure.

The ownership of a private limited company is transferable through the sale of shares. This facilitates changes in ownership and can be a significant advantage when planning for succession or the sale of the business. Therefore, a private limited company enjoys perpetual succession, meaning that its existence is not affected by changes in its membership. This ensures business continuity even in the event of the death, withdrawal, or insolvency of a shareholder or director.

What are the Minimum Requirements for registering a private limited company in Kenya?

To register a private limited company in Kenya, you must have a minimum of one shareholder. This means that, as a founder or business owner, you can be the sole shareholder of the company. Having a single shareholder simplifies the process for entrepreneurs who wish to maintain full control over their businesses. However, it's common for businesses to have multiple shareholders, as this allows for easier capital raising and sharing of responsibilities.

Similarly, a private limited company in Kenya must have at least one director. The director is responsible for the day-to-day management and decision-making of the company. This could be the founder, one of the shareholders or a skilled person. While the law mandates a minimum of one director, companies can appoint more than one director if they wish. Additional directors can bring diverse skills and expertise to the company's management, enhancing its overall governance and decision-making capabilities. The Director can also serve as the company secretary, which simplifies administrative requirements, especially for small businesses. However, only companies with a paid-up capital above Kshs. 5,000,000 are required to have a company secretary.

Additionally, every private limited company in Kenya is required to have a registered office address. This address serves as the company's official and legal contact point, and it is crucial for various purposes, including communication with government authorities, service of legal documents, and record-keeping. If the registered office address of the company changes, it is mandatory to notify the Registrar of Companies within 14 days of the change. Failure to do so can result in penalties and legal consequences.

There are no restrictions on the nationality or residency of shareholders and directors. This means that both Kenyan and foreign individuals or entities can fulfil these roles in a private limited company. However, it is advisable to have a Kenyan resident as one of the Directors or a company secretary in cases where the foreign Director has not obtained the Certificate of Residence (alien card). This is because the management of the company on the BRS portal can only be accessed by a Kenyan resident or a foreigner who has obtained an alien card.

What is the legal bedrock upon which a private limited company in Kenya is built?

The memorandum and articles of association are the legal bedrock upon which a private limited company in Kenya is built. The Memorandum of Association outlines the company's shareholder details while the Articles of Association contain the rules and regulations for the internal management and administration of the company. They provide clarity, structure, and governance rules that are essential for the smooth and effective operation of the company. These documents not only define the company's legal existence and purpose but also safeguard the rights and interests of shareholders and outline the responsibilities and powers of Directors.

The companies Act 2015 introduced standard Articles of Association that can be adopted by a company during registration, however, it is advisable for a company to tailor their own articles of association to the interest and the needs of the company. Get customised articles of association here.

Documents/Information required for registration of a company

Below are some of the required documents for registration of a company. It is important to note that the registrar has a desecration to ask for more documents

A copy of national I.D. card, passport or alien card (for foreigners), KRA PIN certificate and recent coloured passport photograph of each Shareholder, Director and the Company Secretary.
Postal/residential Address Details for shareholders, directors and company secretary.
Email addresses and phone number of each Director.
Physical address of the company.
Email address and phone number of the company that is being incorporated.
Articles of association.
Shareholding information (ratio of how shares are held by the Directors).
Beneficial ownership information.

Conclusion

In conclusion, registering a Private Limited Company in Kenya brings valuable benefits, including limited liability protection, business stability, and perpetual succession. The legal bedrock of such a company lies in its customizable Articles of Association, providing a tailored framework for governance. Get your personalized Articles of Association to safeguard interests today!

How we can help

At CM SME Club, we provide valuable legal advice and guide businesses on the incorporation of Companies including advising on the documentation required to protect the interests of the Company. Book a consultation today via email or call +254 745 342 125.

Published on Aug. 22, 2024, 1:10 p.m.