‘Non-profit organisation’ is an umbrella term used to describe independent entities that are established for purposes other than generating profit. These types of organisations typically take on missions that tackle social, economic, and environmental challenges, and may range from community-based organisations to large international operations. In Kenya, the types of non-profit organisations are: 

PBOs 

In May 2024, the Public Benefit Organisation Act 2013 officially came into force, thereby repealing the previous Non-Governmental Organisations Coordination Act 1990 which previously provided for the registration and coordination of NGOs. The PBO Act now forms the legal framework for non-profit organisations involved in public benefit activities. 

A PBO is a voluntary membership or non-membership grouping of individuals or organisations, which is autonomous, non-partisan, non-profit making and: 

Section 5(2) of the PBO Act explicitly prohibits certain organisations from political parties, trade unions, MFIs, SACCOs, Societies and religious organisations. NGOs that were previously registered under the old Act are deemed to be registered under the PBO Act, however, they must still formally apply for re-registration within a year after its commencement, i.e. May 2025. Additionally, NGOs that were previously exempt from registration under the old Act will now be required to register under the PBO Act within three months from its commencement. Failure to register will result in a loss of benefits enjoyed by PBOs, including: 

International organisations that want to operate in Kenya as PBOs must: 

Societies 

Societies are member-based organisations created to pursue social, cultural, or welfare activities. Per the Societies Act 1968, a society is “any club, company, partnership, or association of ten or more persons, whatever in its nature or object, established in Kenya or having its headquarters or chief place of business in Kenya”. The Societies Act specifically excludes certain organisations and entities, including trade unions, cooperatives, companies, schools, banks, and more. To acquire legal status, societies are required to register with the Registrar of Societies. They may register as: 

Companies Limited by Guarantee 

Unlike a limited liability company which is limited by its by shares, a company limited by guarantee (CLG) is limited by its guarantors who agree to pay a nominal amount towards company debts. This legal structure is preferred by most non-profit organisations because it enables them to enjoy the advantages that arise from incorporation without being restricted in their purpose or objective as PBOs are. CLGs are governed under the Companies Act, 2015 and must register with the Registrar of Companies. They must also undergo a vetting process by the National Intelligence Service. 

Trusts 

A trust is a legal entity created to hold and manage assets for the benefit of others. After the Trustee (Perpetual Successions) Act – the legislation that governs the incorporation of trusts - was amended earlier this year, trusts can now be registered with the Registrar of Companies. In Kenya, three types of trusts may be incorporated: 

Charitable trusts are formed exclusively for the purpose of the “relief of poverty, the advancement of education, religion, or human rights and fundamental freedoms, or the protection of the environment, or any other purpose beneficial to the general public”, per Section 3B of the Trustees (Perpetual Successions) Act. Trusts are a flexible option for non-profit organisations because they are unencumbered with the restrictions imposed on PBOs, or CLGs. 

Family trusts on the other hand are established where assets are transferred into a trust to benefit family members, with trustees managing the assets on behalf of the beneficiaries. Family trusts are commonly used for estate planning, asset protection, and managing wealth for future generations.  

Conclusion