ANALYSIS OF BUSINESS LAW (AMENDMENT ACT NO.1 2020): WAY OF DOING BUSINESS IN KENYA

Authored By:

Prayanshu Taliyan(Research Intern)


INTRODUCTION

The Business Law (Amendment) came into force on the 18th March 2020 amended 16 pieces of legislation. With the enactment of this law, it has been amended to facilitate ease of doing business in Kenya. This Amendment Act talks about electronic Signature. Although the Government had introduced e-Government services in most of its departments and ministries, it had not comprehensively provided for the use of electronic signatures. The amendment Act has broadened the use of electronic signatures as captured under the different amended statutes, and digitalized legal processes in the Country.

Kenyan government came up with the process of Advanced Signature and Electronic Signature that had been provided for under the Kenya Information and Communication Act, No. 1 of 1998 (Hereinafter KICA).

Advanced Electronic Signature:- AES is a Digital Signature based on the Advanced Certificate Uniquely Identifying the signer

- It particularly recognizes and interfaces its signatory

- The private key used to make the electronic signature is under the sole control of the signatory

- If the information is altered after the message has been marked, the signature must recognize this has occurred

- Invalidating the signature on the occasion its’ going with information has changed.


Electronic Signature:- An electronic signature or e-signature, is a lawful method to get assent or endorsement on electronic documents or structures. One of the most heaps of an electronic signature is "an electronic sound, symbol, or procedure connected to or logically connected with a record… embraced by an individual with the aim to sign the record. An Electronic signature can be utilized to supplant transcribed signature in practically every personal or business process. Example contracts, application form, recently recruited employee onboarding structures, nondisclosure understandings, seller onboarding reports, and RFPs, change authorizations, and government benefits enrolment structures.

This article will Highlight some elementary points regarding the statute that have been amended as follow:


1. THE LAW OF CONTRACT ACT (LAWS OF KENYA, CAP 23)

Under the Law of Contract Act, The definition of word ‘sign’ has been amended to incorporate Advanced Electronic Signature. It can be used to capture both Physical & Electronic Mark.

eSignatures are lawfully substantial and permissible in the Court of Law. Kenya follows a model where eSignatures or Digitalsignature gave by a Certifying Authority are considered lawfully legitimate. Explicit use cases for eSignatures are shown in the Information and Communications Act[1].


2. THE REGISTRATION OF DOCUMENTS ACT (CAP285 LAWS OF KENYA)

It expanded the definition of signature and signed under the act and exclude the previous method of physical appending a mark on documents. It also includes advanced signature and electronic signature. The Definition of “book” now include an electronic work electronic signature has been characterized to mean information in electronic form attached to or intelligently connected with other electronic data which might be utilized to distinguish the signatory according to the data message and demonstrate the signatory's approval of the data contained in the data messages basic work is to recognize the electronic book as valid means. Of keeping of register in the registries

· To maintain the principle and coast registries in electronic form

· To allow the use of advanced electronic signatures in the execution of documents

The RDA currently likewise gives that the Registrar of Lands may build up and keep up the Principal and Coast registries in electronic form. Further, an individual may enlist a document or dousing title by documenting it in either physical or electronic structure[2].


3. THE SURVEY ACT CAPS 299 LAWS OF KENYA

The definition of Advanced Electronic Signature and Electronic Signature has been defined under this act. Further, the BLAA introduces a new Sub Section 5(3) to the Survey Act to the effect that a document or plan that has been processed electronically and bears the prescribed security feature shall be deemed to bear the imprint of the seal of the Survey of Kenya (ANALYSIS OF THE BUSINESS LAWS (AMENDMENT) ACT, 2020: FACILITATING THE EASE OF DOING BUSINESS IN KENYA, 2020)(ANALYSIS OF THE BUSINESS LAWS (AMENDMENT) ACT, 2020: FACILITATING THE EASE OF DOING BUSINESS IN KENYA, 2020)

The survey Act allows to:

a) It gives the surety seal of the survey of Kenya to proceed with the electronic form which includes the security features.

b) surveyors to execute and deport any overview plans, field notes, and calculations with Director both physically and digitally.

c) The Director has to approve to the above documents, both physically and digitally.

This implies that parties will currently have the additional choice to continue with the review procedure carefully in a transition to progress from a manual to a digital framework track the status of their applications on the digital framework.[3]


4. THE STAMP DUTY ACT (CAPS 480 LAWS OF KENYA)

Section 2 of Stamp duty Act CAPS 480, has been expanded and the definition of stamp now includes a signature embossed or, impressed by electronic means or use dye and franked machine. Section 119 has been amended to provide electronic stamping. It will assure that there will be no need for physical stamping of form in the registry[4] (Kenya: key highlights of the Business Laws (Amendment) Act, 2020, 2020)c. The Cabinet Secretary is now responsible for matters related to finance or making regulations regarding electronic stamp.


5. THE LAND REGISTRATION ACT NO. 3 OF 2012

The LRA introduces the use of electronic instruments and signatures including electronic seals. It ought to likewise be noticed that where Parties agree to have an instrument electronically executed, at that point the equivalent will be treated as legitimately executed. Besides, this considers the instrument to be electronically processed. Further, parties won't have to get a Certificate of Land Rates or a Certificate of Rent as proof that rates and lease were paid before transferring land. The ramifications of these progressions will be the expenses and procedures identified with lease and rates related to the transfer of land will be reduced. Further, The land transfer can be executed and processed electronically without the parties being physically present[5].

The prerequisite for rates and lease clearance and assent from the national or regional governments for the purpose of the enlistment of instruments transferring, vesting or, making an interest for land, have additionally been erased. With the acquiring of these assents now and again introducing expected bottlenecks in the transaction, this invite improvement will ideally encourage better turnaround times and assisted consummation of land transaction

A Person can make an application to Chief land Registrar for investigation and consideration under section 83 of this act which has been amended to give a right to persons for claiming indemnity. It also enables the person who made an application to CLR to appeal in the High court.


6. THE COMPANIES ACT, NO.17 OF 2015

The Company no longer requires a company seal. Now a contract can be made by a company in writing. The contract entered into by companies might be executed by the executives, the company secretary or, an individual holding a power of attorney[6].

The Act additionally revises the Companies Act to eliminate bearer shares. Holders of bearer shares have documentation of share ownership but yet are not recorded as members in the register of members of the company. companies are now required to change overall bearer

shares to registered shares within 9 months of enactment of the Act and to tell the Registrar of such conversion within 30 days.

The Act additionally also amended the Companies Act to change the limits required for "squeezing in" and "selling-out". The edge for "squeeze -ins" and "sell-outs" has now been reinstated at 90%. In 2019, the Companies Act had been corrected to lessen the limit from 90% to 50%.

"Squeezing-in" licenses a financial specialist, following a takeover for a Kenyan company, to secure minority shareholdings on a compulsory basis on the off chance that it has obtained or genuinely contracted to get at least 90% in the estimation of the shares to which the takeover offer relates and at least 90% of the voting rights conveyed by the shares to which the offer relates(THE BUSINESS LAWS (AMENDMENT) ACT, 2020, 2020).


7. THE INSOLVENCY ACT, NO. 18 OF 2015

The creditor has a right to know about the information regarding a company that has been placed under administration from a relevant Insolvency practitioner. It’s a duty of Insolvency Practitioner to provide information to a creditor within 5 days.

Provisions related to moratoria have been amended. A moratorium is a timeframe during which transaction or legal procedures (in regard to companies under administration) are confined from proceeding without the approval of the administrator or a court. During a moratorium, assets can't be acknowledged or sold without the administrator's approval.

Segment 560A of the Act is revised to accommodate extra contemplations that the court or administrator may consider on an application for the application to lift a moratorium. The additional considerations include[7]:

I. Regardless of whether the value of the secured creditor's claim exceeds the value of the encumbered asset;

II. Regardless of whether the secured creditor is not receiving for the protection for the decrement in the value of impeding assets ;

III. Regardless of whether the provision of the protection is viable or unwieldy on the estate;

IV. Regardless of whether the impede asset isn't required in revamping or sale of the company as a going concern.

8. THE KENYA INFORMATION AND COMMUNICATIONS ACT, NO. 2 OF 1998

This act (KICA) has been amended and add Electronic Signature to execute the title documents. Pursuant to the conditions of the KICA, the Communication Authority of Kenya (the CA) will have a critical task to carry out in the new space of electronic marks. The CA is commanded with the permitting of electronic certification service co-ops whose job will be to by and support the electronic signature and to adhere to procedures that give a guarantee that the secrecy and privacy of the electronic signatures. Although these restrictions are no more applies but it must apply to wills and instruments.


CONCLUSION

The various Amendment is really helpful for Ease of doing business in Kenya and the Government plays a crucial role. The Digitalization of the transaction is actually anticipated in the cost-effective way by providing Electronic Signature and Advanced Electronic signature which reduces the chaos of paperwork and ensuring the smooth engagement of Business Transactions in Kenya.


References: [1]. (eMudhra, 2020)https://www.emsigner.com/Areas/Home/legalityCountryKenya [2]Ibid [3]https://www.dentons-hhm.com/en/insights/articles/2020/march/26/kenya-highlights-of-the-business-amended-law [4]The above changes look to relocate the stamping process (as required under the Stamp Duty Act) to an electronic stage, and diminish the issue of physical stamping. This is dependent upon the authorization of the guidelines that will give extra direction on e-stamping.”https://www.lexology.com/library/detail.aspx?g=fe49c5ac-fee6-451c-9ef7-dad356b690d7 [5] Ibid, 3 [6] supra [7]Ibid n 3

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