Declaring beneficial ownership refers to disclosing the individuals or entities that ultimately own or control a company or asset, even if the ownership is held indirectly through other entities. The Registrar of Companies has placed significant importance on updating the Register of beneficial owners due to its potential to enhance transparency, prevent money laundering, combat corruption, and promote financial integrity.
A Beneficial Owner is a natural person who has control over a legal person and holds transactions on their behalf. In line with The Companies Act, No. 17 of 2015, Section 93A, every company shall keep a register of its beneficial owners and any changes updated within thirty days. Further guidance is provided in the Companies (Beneficial Ownership) Regulations, 2020 (the Regulations).
Non-compliance with this requirement is an offence under the Companies Act, No.17 of 2015. The Company and its officers who are in default may be liable on conviction, to a fine not exceeding five hundred thousand shillings.
The Disclosure of Beneficial Ownership details aims to bolster investor trust, foste sound corporate governance, and expose illicit activities such as tax evasion, money laundering, corruption, counter terrorist operations, and other unlawful endeavors that may involve one or multiple companies.
The Declaration of Beneficial Owners applies to owners who:
Disclosure of beneficial ownership plays a central role in the following ways:
Legal compliance: `compliance helps maintain the legality and legitimacy of businesses at both domestic and international standards. Sharing beneficial ownership information facilitates coordination in combating global financial crimes, corruption and money laundering.
Public Trust and Good Governance: supports good governance by establishing trust between the government, businesses, and the public. Disclosure demonstrates a commitment to ethical business practices and the rule of law.
Risk Assessment and Mitigation: information on Beneficial Ownership is used to assess the risk associated with a potential business relationship or transaction and implement necessary risk mitigation measures.
At a Company level, declaring beneficial ownership will require nominee shareholders disclose details of their principal who is the true beneficial owner and meets the criteria highlighted above. Additionally, businesses that use chains of corporate entities will also now be required to disclose their real owners.
Companies should prepare the Register of beneficial owners (Form BOF 1) and once prepared, the company must lodge the Register with the Registrar of Companies within thirty (30) days to ensure compliance. Conversely, companies are worried about whether there are limitations governing the Registrar and other individuals in terms of utilizing and disseminating data concerning beneficial owners.
The Company’s Act and the Regulations limit the use and disclosure of the beneficial ownership information. The Regulations stipulate that beneficial ownership information shall not be made available to the public and illegal disclosures are an offence and attract a fine not exceeding KShs 20,000/- or to be imprisonment for a period not exceeding six months or to both.
Updating the Beneficial Ownership information is central to promoting transparency, legal compliance, and good governance practices. If you would like to discuss this further, please get in touch at firstname.lastname@example.org