Business transactions in Kenya are governed by a myriad of laws including the Companies Act, the Law of Contract Act, among other laws.
The Business Laws (Amendment) Act (the ‘Act’) has introduced far-reaching changes to most of the business laws in Kenya. At the heart of the Act is the objective to achieve ease of doing business. The Act was assented to on 18th March 2020.
Key Highlights of the Act
The new Act provides that the definition of a signature now includes an electronic signature. The previous position of the law did not clearly provide for electronic signing of documents. For instance, while the Evidence Act provided for production of electronic evidence, the provision of electronic signing of such electronic evidence was conspicuously missing.
An electronic signature means data in electronic form which is logically associated with other data in electronic form which may be used to identify the signatory in relation to the data message and indicate the signatory’s approval of the information contained in the data message. Accordingly, persons will now be able to sign documents electronically. The electronic signature will have the same legal validity as does the physical signature.
This will be convenient in executing documents, especially where the parties are in different physical locations at the time of execution.
The Act amends the definition of stamping under the Stamp Duty Act, to include a mark impressed by electronic means. This amendment paves the way for electronic stamping of documents and as an effect, will reduce the time and inconveniences that are associated with getting documents physically stamped at the land registries. This new means of stamping will thereby fasten the process of stamping documents and make the process generally more efficient.
Electronic instruments under the Land Registration Act
The Act amends the definition of an instrument under the Land Registration Act to include instruments in both physical and electronic form. Accordingly, instruments in land can now be processed and executed electronically, subject to the creation of the relevant systems at the Lands Registry.
Further, before the commencement of this Act, certificates evidencing payment of rent and/or rates were a requirement in the registration of interests in land. The Act has now deleted provisions of the Land Registration Act providing for certificates of rent and rates.
No more requirements for a Common Seal
The Act has done away with the provision for a common seal for execution of documents for companies. Previously, the Companies Act provided that Companies may have a common seal for execution of documents. Additionally, the Companies Act provided that a company that has a common seal may have an official seal for use outside Kenya. The new Act has now deleted these provisions. Consequently, Companies are not required to have common seals and official seals.
Companies can now also execute their documents through authorized signatories, without inscribing their common seals and official seals.
M&K Advocates Advisory Statement
- Evidently, the Act has brought extensive changes in the conduct of business transactions. Legal practitioners and company officers are therefore expected to acquaint themselves with the provisions of the Act.
- The Act is more detailed, and this alert only provides a snippet of the general feel of the new law. We at Muma & Kanjama Advocates are ready and willing to train and partner with companies, firms and organizations in order to advise further on the carrying out of business transactions in accordance with the new law.