You are probably thinking about starting a company in Kenya but you are still unsure of how to go about it.
This article will help you figure out clearly which type of company best suits your needs and purpose in both your short term and long term goals, as well as outlining the process of registration.
The government of Kenya has simplified the whole procedure of registration of companies.
For instance, an individual can perform a name search and register their company name entirely online on the eCitizen platform and no manual registration of businesses will be conducted by the registrar of companies.
In the broadest sense, there are two types of Companies namely: Limited and Unlimited Companies.
Note: Failure to make due considerations and identify the distinctive features has resulted in many unplanned conversions, overhead costs in effecting amendments, penalties on unknown requirements of the type of company incorporated and many more unwarranted consequences.
What is the difference between a Limited Company and Unlimited Company?
The basic difference is in liabilities. A limited company has limited liability whereas an unlimited company has unlimited liability.
Unlimited Companies
For unlimited companies, there is no limitation on the liability of members to pay the debts of the company and the members are jointly and personally liable for the debts in case of winding up.
However such companies are rarely incorporated nowadays but they may be necessary where:
The risk of insolvency is small.
The company is to operate in a field where limited liability is frowned upon.
The secrecy in relation to financial affairs is important.
Where it can be foreseen that reductions in capital may become desirable.
Limited Companies
A limited company is a type of company which when set-up allows an entrepreneur to keep their own assets and finances separate from the business itself.
This means that people who have invested in the business (the shareholders) are only responsible for any company debts up-to-the amount that they have invested and no more.
It is, therefore, a good way for a business to get investment without risk to personal wealth.
Companies may be limited by shares or guarantee.
Companies Limited by shares
A company is said to be limited by shares if the liability of its members is limited by the memorandum to the amount if any, unpaid on the shares respectively held by them.
Two categories of companies fall in this sub-part.
These are Public companies limited by shares and Private companies limited by shares.
Companies Limited by Guarantee
A company may be limited by guarantee. Such a company is one whereby the company’s memorandum of association provides for liability on the part of its members to contribute a fixed sum of money towards its debts, should the company be wound up.
This form of company is most useful where:
Incorporation is necessary or desirable.
There is no immediate need for capital to carry out the objects of the company.
It is desired to limit the liability of the members.
Note: Associations not for profit (for example, clubs, and associations of traders for trade protection or information) are most commonly incorporated as this type of company.
It is also appropriate for professional, trade and research associations, and clubs supported by annual subscription.
It may also be used for registration of charitable and not for profit organizations.
Such a structure is particularly useful where it is desirable to avoid the need to transfer a share every time a member leaves or joins.
How to Register Limited Company in Kenya
A. Log in to your eCitizen account
For you to use the eCitizen platform, you need to have registered on it which is a simple process.
Once you log in, select Business Registration Service.
B. Name search
Once you are in the Business Registration Service, click on Make Application.
It will take you a section where you will click on Business Name Registration.
In the next step, you will need to choose the type of business you want to register plus your preferred business name.
If say you want to register a sole proprietorship or partnership, then choose Business Name Registration and if you want to register Private Limited Company then choose that option and so on.
Note: A name search is processed within a day and only one name can be submitted at a time. It is processed from Monday to Friday between 8am to 5pm excluding public holidays.
C. Business Registration
Once the business name has been approved, you can then be allowed to register your business.
Note: The name search approval is not communicated via email so you have to keep checking the eCitizen website.
Requirements for registration
Once your company name has been reserved, you will need to provide your information that will be used to prepare your company documents.
Here are some of the information that you will need to collect;
1. Director(s) Details
Full names – your full names as displayed on your ID/Passport will be used on the application
Occupation – you will need to state your occupation e.g. IT Consultant, marketing consultant, finance consultancy, consultant etc.
If you don’t have any occupation, don’t worry, you can simply put either a businessman or businesswoman.
Postal address – you will need to provide your postal address.
If you don’t have one, you can register it with Posta Kenya.
Physical Residential address – This information will be used on the Form CR8 to comply with the Company Act which requires all directors to provide their residential address.
You’ll need to provide LR number or house number, building name (if any), street name, town name, country.
Share Allocations – each director will need to be allocated at least 1 share. Remember that the total number of shares available for allocation is 1,000 shares. You can plan to allocate your 1,000 shares using percentages such as 60%/40%, 50%/50%. However, if you are just the sole director then you can have 100% share ownership.
Proof of Identity documents – you will need to provide the following documents for registration, without them your application will be rejected.
Copy of ID or Passport – you can scan or photocopy your identification document.
Copy of KRA PIN certificate – all Kenyan directors/shareholders will need to provide KRA PIN, however, foreigners won’t need to provide one for the registration.
Photos – must have a clear background and show all your facial features, just like a passport photo.
Note: Please avoid submitting photos that have someone wearing sunglasses, hats; this could cause your application to be rejected by the Registrar.
2. Company Details
Company Name Suggestions – you’ll need to come up with up to 2 company name that you would like to check its availability.
Nature of business – with the new Company Act 2015, you can now do all trade of consultancy business without any restrictions.
Location of business premises – you will need to provide the location details of your office including LR Number or Plot Number.
Building name (if any), Street name, Town name. If you don’t have a business premise yet, then you can provide your home address then make the changes later once you have secured business premises.
Once you have provided the above information, your company documents will be prepared and each director will be required to sign the Memorandum & other documents as follows;
Form CR1 – Application Form for Company Registration
Form CR2 – Memorandum
Form CR8 – Notice of Residential Address of Director(s)
Notice of Nominal Capital Share
Cessation Form (only applicable for applicants who are upgrading their business to the limited company)
3. Certificate of Incorporation
Upon signing your documents, your application will be submitted at Company Registry for the process.
The documents will be verified and approved before going to the Company Registrar for signing.
After a few days, your certificate will be issued.
4. Duration
Registration takes a week and certificate will be available on the eCitizen platform for download.
5. Costs
Name search – Ksh 150
Company registration – Ksh 10,650
Partnership and Sole proprietorship – Ksh 1,000
So now you know the process of registering a limited company in Kenya.
