Introduction 

In May 2024, the Public Benefit Organisation Act 2013 finally came into force, therefore replacing the Non-Governmental Organisations Coordination Act, 1990 as the new legal framework for the non-profit sector. This new act has introduced sweeping reforms including the introduction of the reformed non-profit entity body: the Public Benefit Organisation (“PBO”) which streamlines the definition of non-profit, charitable and developmental institutions under a single umbrella term. With this recent legislative development, there has never been a better time to establish or register a PBO in Kenya. In this article, we will explore the legal benefits and incentives of registering as a PBO in Kenya, demonstrating how this new framework provides non-profits with a new opportunity to fulfil their missions and serve the community. 

What is a ‘PBO’?  

A PBO is a non-profit organisation that engages exclusively in activities beneficial to the public, particularly in areas such as health, education, human rights, and environmental protection. According to Section 2 of the Act, a ‘public benefit activity’ is: “an activity that supports or promotes public benefit by enhancing or promoting the economic, environmental, social or cultural development or protecting the environment or lobbying or advocating on issues of general public interest or the interest or well-being of the general public or a category of individuals or organizations;”. An exhaustive list of areas of activity for which organisations may be registered can be found in the Sixth Schedule of the act, and includes but is not limited to: 

What are the Benefits? 

The ‘PBO’ status granted following registration provides legal protection under Kenyan Law, including legal personhood.  Registered PBOs may operate as legal persons, enabling them to purchase property under their own name, enter into contracts and protect themselves against any legal liabilities. This will help non-profits long-term stability as their assets will be better protected and their operations formalised. 

The new Act also established the Public Benefit Organisations Tribunal, a binding alternative dispute resolution body which is able to hear a broad range of cases. The tribunal can now hear all cases pertaining PBOs. This provides more non-profits with a cost-effective recourse for disputes and conflict resolution. Additionally, the tribunal has been bolstered with greater enforcement powers and is fully independent from the PBO Authority which is the new regulatory body. This independence lends credibility to the industry by ensuring impartiality and fostering trust in the dispute resolution process, allowing non-profits to operate with confidence that conflicts will be handled fairly and transparently. 

The government provides registered PBOs with financial incentives so that they can direct more of their income towards fulfilling their public benefit purposes.  As set out in the sixth schedule of the Act, PBOs are exempted from: 

In addition, PBOs are given preferential treatment for employment taxes, VAT and custom duties on imported goods or services purchased to further their public benefit purposes. To incentivise donations, individuals or companies that donate money to PBOs may be eligible for tax deductions themselves. This tax relief help non-profits retain more of their money and to direct more resources towards their missions and encourages individuals and companies to donate further.  

Conclusion 

To conclude, registering as a PBO in Kenya offers non-profits numerous benefits ranging from financial relief to legal personhood. These benefits enable non-profits to focus on their various public benefit purposes, incentivises partnerships and donations and ultimately lead to a greater impact on the community.  

Are you considering registering your non-profit as a PBO? Here at CM SME Club, we have a team of expert lawyers ready to guide you through the process today. Contact CM SME Club at info@cmsmeclub.com to learn more!  

By: Cherono Barno