Beneficial ownership data not available to public

Kenya’s Statute Law (Miscellaneous Amendments) Act, 2019, made amendments to the Companies Act, 2015, by introducing Section 93A which requires every company registered in Kenya to keep a register of its beneficial owners and file a copy with the Registrar of Companies within 30 days of its preparation or within 14 days after an amendment.

A company’s register of beneficial ownership information (BO Information) discloses the personal information of the beneficial owners of a company, the nature of ownership or control they have, and the date they became or ceased to become beneficial owners. To operationalise this requirement, the attorneygeneral published the Companies (Beneficial Ownership Information) Regulations on February 18 2020, which gave guidelines on, among others, who qualifies as a beneficial owner, the contents of the beneficial ownership register, the filing requirements with the registrar and the restriction on disclosure of information contained in the beneficial owners register.

A beneficial owner of a private company is a natural person who meets any of the following conditions whether individually or jointly in relation to the company:

● Holds at least 10% of the issued shares in a company either directly or indirectly;

● Exercises at least 10% of the voting rights in a company either directly or indirectly;

● Holds a right, directly or indirectly, to appoint or remove a majority of the members of the board of directors; or

● Exercises significant influence or significance control; directly or indirectly, over the company. This includes the person(s) responsible for making strategic decisions that ultimately affect the business or determine the itinerary of the legal person.

On February 24 2022 the attorney-general published the Companies (Beneficial Ownership Information) (Amendment) Regulations, 2022 which aimed to make the public procurement process transparent as well as enable the government to publish important information about a company in matters of public interest and to streamline some regulations to give better effect to the act.

More recently, the attorney-general published the Companies (Beneficial Ownership Information) (Amendment) Regulations, 2023 (new amendment regulations) which are aimed at aligning the disclosure of beneficial ownership information with the Financial Action Task Force (FATF) standards and to provide for the protection of personal data in accordance with the Data Protection Act, 2019.

The new amendment regulations provide that a company can disclose beneficial ownership information in the following circumstances:

● For communicating with the beneficial owner concerned;

● For compliance with the proceeds of in order to comply with the Proceeds of Crime and Anti-Money Laundering Act, 2009, and its regulations;

● For compliance with the Prevention of Terrorism Act, 2012, and its regulations;

● For compliance with a court order;

● On written consent of the beneficial owner;

● To a procuring entity authority where the company participates in public procurement and assets disposals;

● To a contracting authority where the company participates in a publicprivate partnership; and

● To financial institutions such as banks for the purposes of entering into a relationship with the institution.

Disclosure of beneficial ownership by the registrar, on the other hand, is limited to the following entities on written request:

● To a competent authority;

● The Public Procurement Regulatory Authority;

● The Public Private Partnerships Committee;

● Supervisors or regulators of financial institutions such as the Central Bank of Kenya and designated nonfinancial businesses and professionals; and

● Any government agency in charge of implementing anti-money laundering and countering financing of terrorism measures such as the Financial Reporting Centre.

These entities will be required to submit a written beneficial ownership search request at a fee of KES 600 (about $4). The information contained in the search report is only to be used for the purposes of customer due diligence and shall not be disclosed to third parties unless permitted by law.

The new amendment regulations prohibit the publication of BO Information to the public and make an exception to its publication by the Public Procurement Regulatory Authority in the government portal in relation to entities that have been awarded a tender by the procuring entity as part of a contract award or by the government where the matter is of public interest.

The implementation of a central public registry of beneficial information raises concerns about the safety of personal data such as the misuse of personal information by third parties. The Amendment Regulation partly addresses this concern by providing that the publication or disclosure of BO Information shall not include protected personally identifiable information except where the disclosure is made to a competent authority or pursuant to a court order.

Kenya’s position on public access to BO Information bears the hallmarks of the decision of the Court of Justice of the European Union (CJEU) in Joined Cases C-37/20 and C-601/20. In its judgment, the CJEU held that general public access to beneficial ownership registers is unlawful as it violates the fundamental rights to privacy and protection of personal data.

IMPLEMENTATION OF A CENTRAL PUBLIC REGISTRY OF BENEFICIAL INFORMATION RAISES CONCERNS

Furthermore, it held that access to BO Information by financial institutions and competent authorities is necessary and appropriate for achieving the public interest of preventing money laundering and terrorist financing.

Notably, the European parliament extended this access to persons with legitimate interests such as media, civil society and higher education institutions for a period of two-and-ahalf years, which can be renewed, suspended or revoked.

SA also limits public access to BO Information and only allows access to law enforcement and competent authorities. In contrast, beneficial ownership information is publicly available in the UK unless the exception for disproportionate risk to the beneficial owner is invoked.

Given that the disclosure of BO Information to competent authorities or pursuant to a court order will include disclosure of protected personally identifiable data, significant data security challenges are raised. The use of technology such as blockchain to manage beneficial ownership records may prove vital.