The President assented to the Business Laws (Amendment) (No. 2) Act, 2021 on 30th March, 2021 which came into force on the same date. The Act makes changes to several statutes including the Law of Contract Act, Industrial Training Act, the Stamp Duty Act, National Hospital Insurance Fund Act, National Social Security Act, the Companies Act, and Insolvency Act. The overarching objective of the changes is to facilitate the ease of doing business in Kenya.
In this Client Alert, we highlight the changes introduced by the Law of Contract Act and the Companies Act.
The Law of Contract Act (Cap. 23) has been amended to provide that a company does not have to execute contracts under its common Seal. This is to align the Law of Contract Act with the provisions of the Companies Act, which was amended under the Business Laws (Amendment) Act No. 1 of 2020.
Under the amendment, a company can execute contracts either by two authorized signatories, or a director in the presence of a witness who attests the signature.
The Companies Act has been amended to allow companies to hold virtual or hybrid general meetings. Previously, companies would hold physical general meetings where the shareholders attended at the physical location indicated in the notice of the meeting. A company could hold a virtual or hybrid meeting only if its constitutive documents including articles of association allowed for holding virtual meetings.
To address the challenges brought about by COVID-19 pandemic and the prohibition of physical gathering and restriction of movement, the High Court had issued orders allowing public listed companies and private companies to hold virtual or hybrid general meeting even if the articles of association of the company did not provide for holding of the virtual or hybrid general meeting.
Under the amendment, a hybrid meeting is one where some participants are in the same physical location while other participants join the meeting through electronic means including video conference, audio conference, web conference or such other electronic means. Virtual meeting is one where all members join and participate in the meeting through electronic means including video conference, audio conference, web conference or such other electronic means.
The notice for the virtual or hybrid meeting should specify the means of joining and participating in the meeting.
The amendment is a welcome move allowing companies to leverage on technology to hold general meetings especially during the current COVID-19 pandemic where public gatherings are prohibited. It also reduces the cost of holding general meetings such as hiring of venue for a physical meeting and other logistics and hospitality costs of hosting large number of shareholders.
Companies will no longer execute documents under its common seal. The Companies Act has been amended to provide that companies will no longer utilize its common seal. The Business Laws (Amendment) Act No. 1 of 2021 had done away with the requirement for a company having a common seal. However, where an existing company had a common seal, the seal continued to have effect. The new amendment has made a common seal invalid and a company cannot use a common seal to execute documents.