Registration of Beneficial Owners in Limited Liability Partnerships

Registration of Beneficial Owners in Limited Liability Partnerships
Registration of Beneficial Owners in Limited Liability Partnerships

With the upsurge of organized crimes, corruption, and terrorism the Financial Action Task Force (FATF) in 2012 made a recommendation on International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation. One of the preventive measures proposed and adopted was the need for transparency by declaring the beneficial owners of legal persons and arrangements.

LEGAL ALERT: REGISTRATION OF BENEFICIAL OWNERS IN LIMITED LIABILITY PARTNERSHIPS 

With the upsurge of organized crimes, corruption, and terrorism the Financial Action Task Force (FATF) in 2012 made a recommendation on International Standards on Combating Money Laundering and the Financing of Terrorism and Proliferation. One of the preventive measures proposed and adopted was the need for transparency by declaring the beneficial owners of legal persons and arrangements.  

In Kenya, section 93 of the Companies Act 2015 was amended to incorporate the proposal by FAFT. By this addition companies are not only required to keep a register of its member but also a register of the beneficial owners. 

The Limited Liability Partnership (Beneficial Ownership Information) Regulations, 2023, through Legal notice no. 163 aims to ensure all beneficial owners of a Limited Liability Partnership are duly registered. The disclosure of beneficial ownership for Limited Liability Partnerships (LLP’s) is aimed at increasing transparency and accountability within the business entities in Kenya. 

Who is a beneficial owner  

A Beneficial owner is defined in the Companies Act 2015 as the natural person who ultimately owns or controls a legal person. A beneficial owner:  

  1. holds a right to share in at least ten percent of the issued shares in a company either directly or indirectly; 
  2. exercises at least ten percent of the voting rights in the conduct and management of the limited liability partnership whether directly or indirectly; 
  3. holds a right to appoint or remove any Partner or a Manager; or 
  4. exercises significant influence or control, directly or indirectly, over the limited liability partnership. 

Registration of beneficial Owners  

Companies and Legal entities are required to establish and declare the beneficial owners at the formation stage. For legal entities incorporated before the enactment of Limited Liability Partnership (Beneficial Ownership Information) Regulations, 2023, are require to register beneficial owners with the Registrar within 6 months from September 2023. The particulars of the Beneficial Owners that should be included are the name, nationality, date of birth, contact details, address and occupation of the beneficial owner.  Registration of Beneficial owners is made through the prescribed form (LBOF1). Any changes in the beneficial owners shall also be reported to the Registrar in the prescribed form (LBOF2-4).  

The Limited Liability Partnership must give notice to the beneficial owner including nominee partners in order for them to provide the necessary particulars for the register. Following this, any person who fails to comply with the notice will be issued a warning notice. If the warning notice is not complied with within fourteen days, then the Limited Liability Partnership can put a restriction on the person it was addressed to and file the restriction with the Registrar. The restriction will lead to the beneficial owner having no exercisable rights and no payment will be made to them. This restriction can be withdrawn once the initial notice has been complied with. 

Penalties for non-compliance  

LLPs are required to retain beneficial ownership information for a period of ten years from the date a person ceases to be a beneficial owner failure to which both the LLP and the defaulting officers shall be liable to a fine of up to five hundred thousand shillings.  

Where an LLP fails to update beneficial ownership information with the Registrar, they are liable to pay to the Registrar, an administrative penalty of two thousand shillings and a further administrative penalty of one hundred shillings for each day of default. 

Data protection 

It is important to note that this information is protected and any information obtained by the Limited Liability Partnership or the Registrar must not be used or disclosed unless the beneficial owner consents or the information is disclosed, the LLP participates in a public private partnership, to a financial institution when engaging with one or where the LLP participates in a public procurement and assets disposal.  

 

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