The commercial and corporate landscape in Kenya is rapidly evolving, shaped by both global trends and local economic shifts. Businesses of all sizes, from startups to multinational corporations, must navigate an increasingly complex legal environment to remain competitive and compliant with regulatory standards. At OMW Oyomba Mosota & Wamwea Advocates, we stay at the forefront of these developments, offering legal solutions that help businesses adapt to the changing commercial and corporate legal landscape.
In this article, we will explore recent trends and key changes in commercial and corporate law in Kenya and discuss their implications for businesses operating within the country.
1. Strengthening Corporate Governance Regulations
Corporate governance continues to gain prominence in Kenya as the government and regulatory bodies push for greater accountability and transparency within businesses. Following several high-profile corporate scandals, including financial mismanagement and fraud cases, the emphasis on strong governance frameworks has increased.
The Capital Markets Authority (CMA) and the Nairobi Securities Exchange (NSE) have introduced stricter governance requirements for publicly listed companies. These regulations aim to enhance investor confidence and ensure businesses are operating in a transparent, ethical manner. New guidelines require companies to improve the diversity of their boards, with a focus on gender balance and including independent directors to strengthen oversight functions.
Additionally, corporate governance audits are becoming more common. Businesses are required to carry out regular governance audits to assess their adherence to the Companies Act, 2015, and related regulations. This growing focus on governance means that businesses must now prioritize compliance by reviewing and strengthening their internal control systems and corporate governance structures.
Implications: Companies that fail to comply with governance standards risk penalties, reputational damage, and reduced access to capital. Strong governance frameworks not only ensure regulatory compliance but also boost investor trust and long-term business sustainability.
2. Corporate Taxation and New Reporting Requirements
Taxation is another area where significant developments have been introduced. The Kenya Revenue Authority (KRA) has been focusing on increasing compliance through the iTax platform and introducing digital service taxes on multinational corporations operating online in Kenya.
The shift toward a digital economy has prompted new taxation models, particularly targeting businesses that provide services digitally but do not have a physical presence in Kenya. Multinational technology companies are now required to register for VAT and pay taxes on services provided within the country. This change is part of Kenya’s broader strategy to widen its tax base and capture revenue from the rapidly growing digital economy.
Additionally, the KRA has intensified efforts to crack down on tax evasion and enforce compliance by requiring more stringent reporting from companies. New regulations mandate businesses to provide detailed reports on their tax obligations, transfer pricing practices, and ownership structures.
Implications: Businesses operating in the digital space or dealing with cross-border transactions need to ensure compliance with the new tax reporting requirements. Failing to comply could result in hefty fines and back taxes. It is critical for businesses to regularly review their tax obligations and adopt proper accounting practices to meet these evolving tax requirements.
3. Expanding Role of Data Protection in Corporate Law
With the implementation of the Data Protection Act, 2019, Kenya has entered a new era of data governance and privacy regulations. The law aligns Kenya with global data protection standards, such as the European Union’s General Data Protection Regulation (GDPR). This development impacts companies that handle personal data—whether for employees, clients, or customers.
Businesses must now ensure that they have mechanisms in place to collect, store, and process data in compliance with the new regulations. Failure to comply can result in significant penalties, not to mention the reputational damage that comes with data breaches or privacy violations. Companies are required to appoint a Data Protection Officer (DPO) if they are processing large volumes of sensitive data and must obtain consent from individuals before collecting or processing their data.
The Data Protection Act also introduces data localization requirements, meaning that companies processing personal data of Kenyan citizens must store the data within Kenya or comply with cross-border data transfer regulations. This has particularly affected multinational companies that rely on global cloud infrastructure for their operations.
Implications: Companies need to review their data management practices to ensure they comply with the Data Protection Act. Data security measures should be strengthened, and businesses must ensure that they obtain proper consent when handling personal information. The rising importance of data protection will require companies to invest in legal advice and compliance systems to avoid penalties.
