Corporate Secretarial and Governance

The Cost of Compliance: The Companies Act No. 17 of 2015

The Kenya  Companies Act No. 17 of 2015 is a significant change or “improvement” of the Companies Act (Cap 486) . In spite of the benefits therein, like easy formation of companies and room for one man company, the Companies Act No. 17 of 2015 has its own flaws, not known to many yet, especially company directors.

Significant of the changes is the enormous upward adjustment of the penalties for noncompliance with the provisions of the Act, of which, we will briefly have a look into for the time being. The “small” companies have been exempted from the mandatory requirement of appointing a company secretary who in essence is the key officer, especially, in ensuring a company’s compliance with the Companies Act.

It’s without question that most directors, especially for small companies, are not aware of many of the Company regulations either due to their busy schedule or due to the simple contentment that someone else (A company Secretary) will “take care of things.” So the interesting question is: Are the small companies actually exempt?  Unless, directors of such a company have corporate secretarial experience or have employed a full time company secretary (as an employee) which in real sense does not exempt the company from the perimeters of the need to have a company secretary.

Tricky as it may appear, the small companies have an option of appointing a company secretary, or ,avoid the cost of a company secretary at the risk of getting into the wrong side of the law whose cost may be 100 times more than the cost of having a professional secretary (which is highly likely).


Some of the key penalty adjustments relate to:

  1. Annual returns: 

The annual returns are to be filed with the registrar within 28 days after the day to which they are made up failure to which, the company and every officer of the company is liable to a fine not exceeding Shs 200,000.

      2Maintenance of Company records:

Company records includes; minute books, record of all related party/directors transactions with the company and all other secretarial records. Noncompliance to this attracts a penaly not exceeding Shs 200,000 on the company for the first offence and Shs 20,000 on each subsequent offence.

    3. Changes in directors and company secretary:

Save small companies from changes in the company secretary, but they do changes in directors big time. The registrar is to be notified of such change within 14 days after occurrence of the change. Failure to comply to this provision attracts a penalty not exceeding Shs 200,000.

     4. Filing of company resolutions:

A company’s special resolutions are to be lodged with the registrar within 14 days of their passing, to which, noncompliance attracts a fine not exceeding Shs 200,000 on each officer and not exceeding Shs 20,000 on each day the dafault continues.

    5. Directors’ service contracts:

Directors are required to maintain a copy their service contracts with the company available for inspection, failure to which the offence attracts a penalty not exceeding Shs 200,000.

   6. Filing of financial statements with the registrar:

This is a new requirement for both private and public companies. Copies of the financial statements and directors’ reports are to be filed with the registrar within 9 months for private companies and 6 months for public companies. Noncompliance with this provision exposes each officer of the company to a liability not exceeding Shs 200,000.

  7. Registration of transfer of shares:

Share transfers to be registered with the registrar or reasons for rejection of transfer be issues as soon a practicable but within 2 months of the transfer being lodged with the company. Noncompliance attracts a penalty of not exceeding Shs 500,000 on the company and every officer in default.

  8. Record keeping:

Members resolutions and minutes to be maintained for a at least 10 years contravention of which attracts a fine of up to Shs 500,000 and an additional up to Shs 50,000 for every day the default continues on each officer in default.

  9. Lodging of false or misleading information with the registrar:

A person, on conviction for this offence, will be liable to a fine not exceeding Shs 1,000,000 imprisonment for a period not exceeding two year or both.

 10. Preservation of accounts:

Company accounts are to be kept for at least 7 years at the company’s registered office failure to which a fine of up to Shs 1,000,000 is payable by each individual officer and up to Shs 2,000,000 for body corporates.

The areas highlighted above are just a few not covering all the fines. In our next section we shall pay attention to compliance aspects touching on financial statements and reporting of all companies both private and public.

The question any of us will quickly jump into asking is, why such huge penalties? In fact, the previous companies Act’s fines ranged from Shs 100 to the highest being Shs 100,000. In my view, most companies may not have been complying, not because of the low penalties but due to lack of knowledge of the Act’s requirements.

On the other hand, optimists can look at it as a source of more revenue to the government, more compliance expected due to the fear factor of the huge fines and precisely it brings the penalties up to the market values (inflationary adjustment).

Nevertheless, whatever our opinion may be, the Companies Act No. 17 of 2015 is here and we must fit in.



3 thoughts on “The Cost of Compliance: The Companies Act No. 17 of 2015

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