As a commonwealth country, Kenya’s legal system descends from English common law.
Sources of Law
The Judicature Act, Chapter 8 of the Laws of Kenya, provides that the Judiciary shall be guided by the Constitution and all Kenyan written laws, including Acts of Parliament. Where these are silent on a matter, the courts may turn to Specific Acts of Parliament of the United Kingdom as listed in the Act, Common Law, the Doctrines of Equity, and statutes of general application in force in England on 12 August 1897. The courts are also guided by African customary law in certain civil matters and insofar as the customary law is applicable and not repugnant to morality or justice.
The Constitution states that any law that is inconsistent with the Constitution is void to the extent of such inconsistency, and that any contravention with the Constitution is invalid. Furthermore, it states that the general rules of international law form part of the laws of Kenya, and any international law ratified by Kenya forms part of Kenya’s law.
Hierarchy of the Courts
The court system is divided into two: Superior Courts and Subordinate Courts.
The Superior Courts consist of the Supreme Court, the Court of Appeal, the High Court, the Employment and Labour Relations Court (ELRC) and the Environment and Land Court (ELC).
The Supreme Court is the highest court. It only hears appeals from the Court of Appeal on matters of interpretation of the Constitution or matters certified as being of general public importance.
The Court of Appeal hears appeals from the High Court and other Tribunals as may be provided in statute.
The High Court has original and appellate jurisdiction in civil and criminal matters. It also has original jurisdiction to hear matters regarding interpretation of the Constitution and matters regarding the Bill of Rights. Furthermore, the court has supervisory jurisdiction over subordinate courts and any person performing a judicial or quasi-judicial function. The ELRC and ELC are specialised courts of a similar ranking to the High Court, and are established to hear matters regarding employment and labour relations matters and environment and land matters, respectively.
Subordinate Courts consist of the Magistrates Courts, Kadhis’ Courts, the Courts Martial and any other court or tribunal established by statute. Kadhis’ Courts determine issues of Muslim Law relating to personal law disputes – ie, personal status, marriage, divorce or inheritance.
The value of the subject matter of a suit will determine which court has jurisdiction.
The Magistrates Court is divided into five divisions, with the following pecuniary jurisdiction:
Any matter valued over KES20 million is determined by the High Court.
Magistrates Courts have original jurisdiction to hear criminal proceedings except for capital offences, which will be heard by the High Court.
Foreign investments in certain sectors require clearance from governmental agencies or parent ministries before the investor can commence the proposed investment activity. These areas include:
There are further restrictions on shareholding by foreigners in companies undertaking business in construction, insurance, mining, engineering, private security, and Information and Communications Technology.
Despite these restrictions, there are laws that seek to promote foreign investment in Kenya. The Foreign Investments Protection Act (Chapter 518) provides protection to approved foreign investments and foreign investors’ properties, and allows for the repatriation of profits.
The Investment Promotion Act (Number 6 of 2004) promotes investment through provisions that provide incentives to foreign investors and facilitate the obtaining of the requisite licences, as well as incentives. The benefits under the Act are available to foreign investors who seek to invest at least USD100,000 in Kenya.
There are no restrictions on the repatriation of foreign currency by foreign investors. However, transactions involving amounts of USD10,000 or more should be supported by adequate documentation, since the Central Bank of Kenya Guidelines on Foreign Currency require licensed commercial banks and financial institutions to ascertain the source of such funds.
Foreign investors departing or entering Kenya are allowed to carry up to a maximum of KES500,000 and foreign currency equivalent to a maximum of USD6,250 without having to declare at the point of entry or departure.
The sector-specific legislation provides the procedure for obtaining approval for investments requiring approval. This would typically involve following a prescribed application process, supplying documents and prescribed information, and paying a prescribed fee.
Where the requisite approvals are not obtained, this will usually constitute a criminal offence and the registered entity as well as its officer may be liable to pay a fine or a term of imprisonment or both.
In sectors with restrictions on shareholding (construction, insurance, mining, engineering, private security, ICT), foreign investors are required to ensure that the local content threshold is met, either at the time of applying for approvals or within a prescribed period of time.
A foreign investor may appeal against the decision of an administrative body where the investor is aggrieved by such decision, in accordance with the legislation governing the particular sector.
Company Limited by Shares
A company limited by shares is a legal entity that is separate from its owner(s), which are the shareholders. A company is capable of owning assets and incurring liabilities that are separate and distinct from those of its members, entering into contracts, and suing and being sued separately.
The liability of the shareholders of the company is limited to the contribution to the assets of the company, up to the face value of shares held by the respective shareholders. A shareholder is liable to pay only the uncalled money due on shares held by him/her.
A company limited by shares is required to have an authorised share capital, which represents the number of shares that the company can issue to shareholders.
The Companies Act 2015 provides for the formation of a company by a minimum of one shareholder.
Companies limited by shares can be either private companies or public companies. A private company is restricted in offering shares to the general public, and its shares are not freely transferable. On the other hand, a public company may offer its shares to the general public and is therefore able to raise its capital by listing its shares on the stock exchange.
Both private and public companies are required to have Articles of Association, which is the governing document that lays out the rules and regulations of the company.
Limited Liability Partnership
The Limited Liability Partnership Act, 2011 provides for the formation of a limited liability partnership (LLP), which is a body corporate with a legal personality separate from that of its partners.
A partner is not personally liable for the partnership’s obligations other than as a result of a wrongful act or omission by that partner. In addition, a partner is not liable for the wrongful act or omission of another partner.
An LLP may be governed by a partnership agreement/deed; in the absence of such a deed, the default provisions set out in the First Schedule to the Act will govern the partnership.
An LLP must have at least one manager, who must be resident in Kenya. Where the manager is a juristic person, the LLP must appoint another manager who is a natural person.
The minimum number of persons required for the formation of an LLP is two, but there is no maximum.
The incorporation process of a company and an LLP both require prescribed documents to be filed with, and a fee paid to, the Companies Registry. The Companies Registry will then proceed to issue a certificate of incorporation and the Company or LLP will appear in the companies register, which is publicly maintained by the Companies Registry.
The process of registering a company or LLP takes approximately two to three weeks.
Companies are subject to ongoing reporting and disclosure obligations, which are required to be filed with the Registrar of Companies on an interim or annual basis.
The following returns must be filed:
The management structure of a company typically comprises executive and non-executive directors, who are responsible for the management of the company. However, the Companies Act provides that the shareholders of a company can also be appointed as directors and form part of the management structure in their capacity as director and shareholder of the company.
Under the LLP legislation in Kenya, each partner is entitled to participate in the management of the partnership. However, the law requires the LLP to appoint at least one manager who is responsible for ensuring the LLP complies with the LLP legislation. Besides this legal requirement, the members of an LLP are generally free to determine the roles and obligations of each partner in their LLP agreement.
The Companies Act also provides that any provision that limits a director against liability for negligence, default, breach of duty or breach of trust in relation to the company is void. A company may only indemnify a director against any liability in connection with negligence, default, breach of duty or breach of trust in relation to the company out of the assets of the company. However, this indemnity does not cover any liability incurred by directors in defending civil or criminal proceedings against such director. In practice, most companies maintain directors’ liability insurance to cover these costs.
The Companies Act further imposes criminal sanctions on directors for any offence committed under the Act, such as failure to file returns with the Registrar of Companies, failure to provide prescribed documents to the members of the company and contravention of any provision of the Act.
A company has a distinct legal personality from its shareholders. In this regard, the liability of a shareholder is limited to the amount unpaid on any shares held by the shareholder. However, the courts may disregard the separate legal personality of the company and hold the shareholders liable in instances where the shareholders have deliberately used the company as a vehicle to perpetrate fraud or deceit.
Like a company, an LLP also has a legal personality distinct from its members. In this case, the members are only liable for the amount contributed to the LLP. However, the partners may also agree to contribute to the assets of the LLP on its winding-up, beyond their individual contribution to the LLP. Courts may also pierce the corporate veil, as mentioned above.
Employment within the Kenyan private sector is primarily governed by the Employment Act (No. 11 of 2007) as read together with its subsidiary legislation, the Employment (General) Rules, 2014. Where collective bargaining agreements and employers' organisations are present, the Labour Relations Act (No. 14 of 2007) and the Trade Unions Regulations are also applicable. Additionally, the Labour Institutions Act (No. 12 of 2007) establishes the various national labour institutions, and provides for their functions, powers and duties. The Work Injury Benefits Act (No.13 of 2007) and the Occupational Safety and Health Act (No. 15 of 2007), together with their respective regulations, legislate on the injuries and illnesses suffered by employees during the course of their work.
The employment relationship is governed by an employment contract, which must be provided by an employer to an employee and must contain particulars prescribed by the Employment Act. The employment relationship is further governed by any existing collective bargaining agreements, in the case of unionised employees and the Regulation of Wages Orders, which set industry-specific minimum standards that regulate the terms of employment.
Employment contracts or letters of appointment in Kenya are required to be in writing, indicating the period of engagement or number of working days for which the employee is contracted. While most contracts are often drafted in English, the law does require a translation to be provided to employees who may suffer from illiteracy or confusion.
The contract must indicate the details of the employment, including the job description, the place of work, leave allowances, pension plans, terms of renewal and termination, any details of an existing collective bargaining agreement that may bind the employer, and remuneration payable. The contract should also indicate the probationary period of the employee, ensuring not to exceed the recommended six-month period, with any extension required not going beyond a further six months.
With regards to the remuneration payable, the contract should set out whether this is inclusive or exclusive of a housing allowance – a mandatory provision under the Employment Act. In the event of a dispute, a failure to indicate whether or not the pay is consolidated in the contract will lead to an additional 15% provision from the wages payable to cater for the housing allowance.
Employers that have more than 25 employees are required to notify the Director of Employment of every vacancy within their organisation prior to undertaking their own recruitment process, in order to allow an opportunity for qualified unemployed persons to participate in the process.
The various labour laws also recognise the existence of casual workers who operate on a periodic basis depending on the work available. Under the law, casual labourers ought to be paid at the end of each working day. Where the casual work continues for a period of 30 continuous working days, or where the labour required takes a period exceeding three months, it is no longer considered casual labour but is instead deemed a term contract.
The working period for employees in Kenya is regulated by the various Regulation of Wages Orders. While the working hours are generally determined by the employer, the law mandates that normal working weeks should not have more than 52 working hours spread over six working days, and each employee is entitled to at least one rest day in every seven-day week. For night work, an employee is entitled to work no more than 60 hours a week.
Under the Regulation of Wages (General) Orders, when an employee works overtime, their remuneration is payable at 1.5 times the normal hourly rate. When the overtime hours fall on the employee’s rest days or on public holidays, the wages are payable at twice the normal hourly rate. Where the employee’s wages are not calculated on an hourly rate, the overtime payments due ought to be no less than 0.0044 times the employee’s monthly wage.
Additionally, the regulations limit the amount of overtime an employee can work within two consecutive weeks: for night workers, no more than 144 hours of work can be undertaken in that period, whereas for all other adult employees, the limit has been set at 116 hours.
Leave days are calculated on the basis of the months worked by the employee; for every 12 months of consecutive work, an employee is entitled to 21 working days of leave. An employer is required to obtain the consent of an employee in order to space out the use of the annual leave days.
With regards to sick leave, an employee is entitled to a maximum of 30 days' sick leave with full pay and thereafter to a maximum of 15 days' sick leave with half pay in each period of 12 months' consecutive service. This is contingent on the production of a certificate of incapacity to work as soon as is reasonably practicable. However, access to sick leave is caveated under the law where the employee’s gross negligence is the cause of the illness/injury.
Female employees are entitled to three months of maternity leave with full pay. The law allows for a further three months of leave where the mother suffers illness as a consequence of the pregnancy, provided a certificate of incapacity can be produced by the employee. The employer is required to ensure that the employee can return to their previous position of employment or a reasonably suitable alternative on terms that are not less favourable to the employee than she would have received had she not gone on maternity leave. Male employees, on the other hand, are only entitled to two weeks' paternity leave with full pay.
The law also caters for compassionate leave within the Regulation of Wages Orders; employers have been given discretion to make the necessary arrangements with the employee to take up leave days from the annual leave days earned as at the time the leave is requested.
Employers with more than 50 employees are required to have a statement of the organisation's disciplinary rules reasonably accessible to each employee, specifying the conduct expected of them, the disciplinary process and the mechanisms for appeal or redress of their grievances in relation to their employment.
The Regulation of Wages (General) Orders mandate that where an employer deems an employee's work or conduct to be unsatisfactory but not worthy of immediate dismissal, they ought to issue a warning in writing, to be inserted into their record. The employer is required to issue two warnings prior to summarily dismissing the employee after their third unsatisfactory act or omission. Where an employee goes 292 days without incident following the second warning, however, the employee’s record of warnings shall be expunged.
As a minimum standard, employment contracts exceeding one month where wages are payable monthly are deemed to be terminable 28 days after the provision of notice of intention to terminate in writing by the employer. Alternatively, the employer may terminate the contract with immediate effect upon the payment of that month’s wages in lieu of notice. Employers have discretion to extend the notice period in the course of their contractual negotiations, provided they meet the above-mentioned minimum standard.
All terminations must satisfy the procedural and substantive fairness test, even where an engagement is based on a term contract. This means that an employer must not only have a good reason for terminating an employee’s contract of employment (the fact that a contract of employment provides for termination with notice is not reason enough) but must also follow the correct procedure in effecting the termination.
When declaring employees redundant, employers are required to notify the affected employees, or their union representative if they are unionised, of said intended redundancy in writing one month prior to the actual date of redundancy. During this 30-day period, the employer and the identified employees or union officials are to engage in consultations with the aim of mitigating the effects of the intended redundancy or possibly doing away with the redundancy all together. The employer is required by section 40 of the Employment Act to show due regard to seniority in the time, skill, ability and reliability of each employee when deciding who ought to be declared redundant. The employee would need to pay off all the leave days not taken up by the employee, and provide a severance package factoring in no less than 15 days' pay for every completed year of service.
In the event that an employee is terminated after four consecutive weeks of work, employers are required to issue exiting employees with a certificate of service upon the termination of the employment. The certificate ought to include the details of the employer and employee, the period of employment, the nature of the work undertaken and any other accomplishments of the employee.
Where the employee dies during the subsistence of their employment contract, the employer is required to pay their next of kin the dues owed to them within 30 days of the submission of proof of capacity to receive the remuneration.
Employees are entitled to representation by their trade union representative or such other elected employee representatives during disciplinary hearings where the employer is considering terminating the employee.
Additionally, employers must inform and consult trade unions and the Labour Officer (a designated public official within the Ministry of Labour) where the employer is considering terminating an employee on grounds of redundancy.
Under the current laws, employees may not be represented by legal counsel during the course of their internal disciplinary hearings or consultations preceding termination on grounds of redundancy.
An employee is liable to pay income tax – commonly known as Pay As You Earn (PAYE) – on income earned or accrued in Kenya. A person is considered to be a resident if he has a permanent home in Kenya and was present for any time during a particular tax year, or if he has no permanent home in Kenya but was present in Kenya for at least 183 days in the tax year under consideration or has averaged 122 days in Kenya in the tax year and the previous two years.
PAYE is based on a graduated scale based on income brackets, with the lowest rate being 10% and the highest rate being 25%. PAYE is withheld and remitted by the employer on a monthly basis to the Kenya Revenue Authority.
An employee will also contribute prescribed amounts to the National Hospital Insurance Fund (NHIF) and the National Social Security Fund (NSSF).
An employer is responsible for remitting PAYE to the Kenya Revenue Authority every month. The employer is also responsible for remitting the employee’s NHIF and NSSF monthly contributions.
Companies carrying on business in Kenya are subject to the following taxes:
Tax incentives include preferential corporate tax rates, capital allowances, tax exemptions and tax holidays.
Preferential Corporate Tax Tates
A corporate tax rate of 15% is available for the following:
Wear and tear allowances
These are charged on capital expenditure on machinery and equipment. The rate ranges from 12.5% to 37.5%.
Investors are entitled to investment deductions on the cost of the construction of buildings, the acquisition of machinery, certain computer software and farm works.
For commercial buildings such as hotels, hospitals and petroleum storage facilities, the rate is 50% in the first year of use and 25% reducing balance on the residual value. The buildings must be approved by the competent authority in order to qualify for the exemption. In the case of other commercial buildings and educational facilities, including student hotels, the applicable rate is 10% of the reducing balance.
For machinery, the applicable rates are as follows:
For the acquisition of an indefeasible right to use fibre optic cable by a telecommunication operator, the rate is 10% per year on a reducing balance.
For farm works, the applicable rate is 50% in the first year of use and 25% per year on a reducing balance on the residual value.
There is a 150% investment deduction on capital expenditure of at least USD50 million incurred on the construction of bulk storage and handling facilities for supporting the Standard Gauge Railway operations of a minimum of storage of 100,000 metric tonnes of supplies.
Special Economic Zones (SEZ)
These are specially designated geographical areas where business-enabling policies, integrated land uses and sector-appropriate on-site and off-site infrastructure are provided to support business. The Cabinet Secretary for Industry, Investment and Trade is empowered to designate an SEZ.
The incentives for SEZ are as follows:
Export Processing Zones (EPZ)
These are designated areas under the Export Processing Zones Act for the manufacture of goods for export. The incentives for an EPZ are as follows:
Ease of Doing Business
The Investment Protection Act has established the Kenya Investment Authority, which is a one-stop shop for obtaining all requisite investment licences, approvals and exemptions. This is in a bid to improve the ease of doing business in Kenya.
There are currently no mechanisms in place that allow for the registration of a group of companies as one entity for tax purposes. Each company is taxed separately and accounts for its losses separately. The transfer of tax losses within the group is not permitted.
Thin Capitalisation Rules (TC Rules) are contained in various sections of Kenya’s Income Tax Act, and apply in the following circumstances:
For the purposes of the TC Rules, control means the power of the non-resident entity to ensure that the affairs of the resident company are conducted according to the wishes of the non-resident entity (through either their shareholding, voting power or powers conferred by the articles of association or other document regulating the resident company).
Where the above conditions are met, the amount of interest payable on that portion of the resident company’s debt that exceeds the allowed ratio shall not be an allowed deduction.
Additionally, foreign exchange losses in respect of such portions of loans that exceed the allowed ratio shall not be a deductible expense.
A company that has related party transactions is required to ensure such transactions are at arm’s length.
The Income Tax Act empowers the Commissioner to adjust profits accruing to a Kenyan resident where such a person enters into transactions with related non-residents and the transactions result in no realisation of profit, or less than the ordinary profits accrue to the resident person compared to a transaction that had been conducted by persons dealing at arm’s-length.
The Income Tax (Transfer Pricing) Rules, 2006 (Rules) mirror the principles set out in the OECD Guidelines on transfer pricing. The rules require related parties to prepare a transfer pricing policy to justify the pricing arrangements and, upon request, the parties should present the transfer pricing policy to the Revenue Authority.
The thin capitalisation and transfer pricing rules are the key anti-evasion rules in Kenya.
In addition, the Income Tax Act provides that where the Commissioner is of the opinion that the main purpose for which a transaction was effected was the avoidance or reduction of liability to tax, the Commissioner may direct that such adjustments as he considers appropriate are made to that transaction for tax purposes, to counteract the tax avoidance or reduction of liability to tax.
The Competition Act 2010 (the Act) and the Competition (General) Rules 2019 (the Rules) deal with the control and notification of mergers in Kenya.
The term “merger” has a very broad interpretation under the Act and extends to any transaction that includes the acquisition of shares, business or other assets, whether inside or outside Kenya, that results in a change of control of a business, part of a business or an asset of a business in Kenya in any manner and includes a takeover.
The proposed acquisition of control of a target business, whether by way of an asset/business or an acquisition of shares by an acquirer, would constitute a “merger” under the Act and depending on the thresholds would require either prior approval of the Competition Authority of Kenya (CAK) or an exemption from the CAK for the merger from the provisions of the Act, failing which the transaction would be void and have no legal force. Some mergers that fall below the notification thresholds do not require any notification to or approval from the CAK.
Mergers that take place outside of Kenya and have no local connection are also not subject to notification to the CAK as they fall outside the scope of Kenyan merger control.
According to the Rules, the following notifiable mergers require the prior approval of the CAK:
Mergers that need to be notified to the CAK but may be excluded or exempted by the CAK include if the combined turnover or assets (whichever is higher) in Kenya of the merging parties is between KES500 million and KES1 billion, or if the firms are engaged in prospecting in the carbon-based mineral sector, irrespective of asset value.
The CAK does not need to be notified and no CAK approval is required if the combined turnover or assets (whichever is higher) in Kenya of the merging parties does not exceed KES500 million, or if the merger meets the COMESA Commission Merger Notification Thresholds and at least two-thirds of the turnover or assets (whichever is higher) are not generated or located in Kenya.
It is a criminal offence to implement a merger in Kenya contrary to the provisions of the Act, with penalties of up to years' years imprisonment and/or a fine of up to KES10 million, as well as a separate financial penalty that may be imposed by the CAK of up to 10% of the preceding year’s gross annual turnover of the undertakings in question.
A merger filing may be done online on the CAK merger filing portal or by submitting the prescribed form manually to the CAK’s offices. The CAK usually acknowledges receipt of a merger filing within three days of receipt. The CAK has a 60-day turnaround time to decide merger filings where all relevant information has been submitted. In the case of exclusions/exemptions, the CAK has a 14-day turnaround time.
Merger filing fees are as follows:
The Act prohibits agreements or combined practices that have as their object or effect the prevention, distortion or lessening of competition in trade in any goods or services in Kenya, or a part of Kenya, unless the CAK has given an exemption.
Such agreements or practices include those which directly or indirectly fix purchase or selling prices or any other trading conditions, divide markets by allocating customers, suppliers, areas or specific types of goods or services, or involve collusive tendering.
A person (natural or corporate) has a dominant position in the market if they produce, supply, distribute or otherwise control not less than one-half of the total goods of any description that are produced, supplied or distributed in Kenya or any substantial part thereof, or if they provide or otherwise control not less than one-half of the services that are rendered in Kenya or any substantial part thereof.
The following are examples of abuse of a dominant position:
A patent is an exclusive right to exploit an invention, and is granted in exchange for disclosure of the invention to the public. Patents give exclusive rights to the owner to prevent the manufacturing, use or selling of the protected invention. In order for a patent to be granted, the invention must meet the requirement of novelty, which means it must be new. It must also involve an inventive step that is not obvious to persons of ordinary skill in the particular field of the invention. Lastly, it must be industrially applicable and useful. Certain things are excluded from patenting, including methods and schemes of doing business or for performing mental acts; scientific and mathematical formulas; methods of treatment of humans and animals and humans; products that are solely processes of nature and have not been created by human intervention or participation; and inventions that violate public order or are contrary to morality, public health safety, principles of humanity and environmental preservation.
Length of Protection
A patent is valid for a period of 20 years, after which the invention is no longer protected and can be exploited by anyone. During the initial period of 20 years, the patent must be renewed every year, or the protection will lapse.
In order to obtain a patent in Kenya, the applicant is required to conduct a search through the Kenya Industrial Property Institute (KIPI), which is the body corporate responsible for examining and granting patents in Kenya.
Once the necessary approval is granted, an application should be lodged through KIPI. The application should be accompanied by a full description of the invention, and should clearly illustrate the characteristics of the invention and identify the scope of the patent rights sought. The application is published in the Industrial Property Journal 18 months after the date of filing.
KIPI conducts an examination on the proposed patent for purposes of checking the patents’ compliance with the requirements of the IPA. Where a patent application is not accepted, the applicant will be informed by KIPI of the reasons for non-acceptance and provided an opportunity to rectify or update the application.
When an application is accepted, it is advertised in the Industrial Property Journal, after which a patent certificate is issued.
The application process attracts prescribed fees, which are payable at the commencement of every application phase.
As Kenya is a member state of the African Regional Intellectual Property Organization (ARIPO), a regional intergovernmental organisation mandated to grant patents on behalf of its members, it is possible to make regional filings for patent applications through ARIPO. International filings can be done under various treaties to which Kenya is a signatory, including the Paris Convention and the Patent Co-operation Treaty.
Enforcement and Remedies
There are various remedies available for patent infringement. A patent owner can institute legal proceedings at the Industrial Property Tribunal (IPT) established under the Industrial Property Act (IPA). The IPA gives powers to the IPT to grant an injunction to prevent imminent infringement or prohibit the continuation of an ongoing infringement. The IPT may also direct the infringing party to pay damages to the patent holder. Other remedies include patent revocation and invalidation, which may be granted where the IPT is satisfied that the circumstances of particular proceedings warrant it and that infringement has been demonstrated.
The IPT also hears and determines appeals against decisions made by KIPI in relation to patent applications.
Appeals against decisions of the IPT may be filed at the High Court, with the possibility of an appeal to the Court of Appeal on matters of law.
A trade mark is a distinctive word, logo or symbol used for purposes of identifying products in the form of goods and services with a particular producer and distinguishing such products from those of another producer. Registration of a trade mark grants exclusive rights to the owner of the trade mark for use in product identification, and affords legal protection by giving the owner the ability to seek legal redress to restrict unauthorised use of the trade mark by third parties. The proprietor of a trade mark acquires rights for licensing the trade mark to third parties for commercial use.
Length of Protection
A trade mark registration is valid for ten years and is renewable thereafter for unlimited terms of ten consecutive years.
KIPI registers trade marks through national filings as well as international filings through the Madrid system.
Applications for registration commence with a search intended to check the availability and registrability of the intended trade mark. As trade marks are classified into various classes, identification of the class in which the trade mark is intended to be registered is a significant part of the application. Kenya applies the classification system outlined in the 11th edition of the Nice Agreement on international classification of goods and services, which categorises goods and services into various classes and effectively harmonises the classification of goods and services worldwide.
The proposed name must contain at least one of the following particulars:
Applications submitted at KIPI are subjected to a similarity check for purposes of confirming whether the proposed trade marks are similar to existing and registered trade marks. Substantive examinations are also done to check for conformity with the Trademarks Act and Regulations.
Once approval is given at the examination stage, the trade mark is advertised in the Industrial Property Journal, inviting objections from third parties within 60 days of the advertisement. If no objections are made, a Certificate of Registration is issued.
If objections are raised, objection proceedings are commenced for determination by the Registrar of Trademarks. Decisions made by the Registrar of Trademarks may be appealed against by a dissatisfied party. A further appeal is available at the Court of Appeal on points of law only.
Foreign applicants are required to file applications for registration through a duly qualified agent, who should be an Advocate of the High Court of Kenya.
Enforcement and Remedies
Under the Trademarks Act – Chapter 506 Laws of Kenya, only registered trade mark proprietors can successfully make claims for trade mark infringement.
Enforcement of a trade mark can be done by the trade mark’s proprietor in objector capacity by lodging opposition proceedings at KIPI against proposed trade marks that bear striking similarities to the objector’s registered trade marks. A proprietor of an infringed trade mark may obtain an injunction barring further infringement or the unauthorised use of a trade mark, claiming an award for damages and even orders for delivery up and destruction of the offending products.
Other enforcement means include seeking cancellation of an offending trade mark, filing infringement and passing off proceedings.
Judicial decisions made pursuant to enforcement measures are subject to appeal at the High Court and further appeal at the Court of Appeal.
Industrial designs are forms, patterns and shapes that give a special or unique appearance to a product of industry or handicraft.
In order to be eligible for protection, an industrial design must be new – ie, it must never have been disclosed to the public anywhere in the world. It must also strictly relate to the outward appearance of objects and not the method of its construction or its functionality.
Length of Protection
In Kenya, industrial design registrations are valid for a period of five years and can be renewed for two further terms of five years each.
Registration of industrial designs is undertaken at KIPI. The application for registration involves a search to establish whether the design is suitable for registration. Once the design is approved as having met the required conditions, an application is lodged and advertised for the invitation of objections within 60 days of the date of publication of the design.
If no objections are received, the registrar will proceed to issue a certificate of registration.
Enforcement and Remedies
The owner of an industrial design may institute legal proceedings in court for infringement. If it is proven that loss has been suffered due to the infringement, the court may award compensation by way of damages, or make an order for delivery of an account of profits. It is possible to obtain a temporary court order in the form of an injunction to prevent further infringement during the pendency of proceedings.
A copyright grants legal protection for creations of original content in literary, musical, artistic and audiovisual works. To qualify for copyright protection, the literal, musical and artistic works must have been written down, recorded or otherwise reduced to tangible form. Registration gives the owner the following rights:
Length of Protection
Literary, musical and artistic content is protected for 50 years from the date of the author's death.
Audio-visual works are protected for 50 years following the year in which the work was either availed to the public or first published, whichever comes later.
Sound recordings are protected for 50 years from the year in which they are made.
Broadcasts are protected for 50 years from the end of the year in which they were first made.
The Copyright Act (Number 12 of 2001) governs the use and application of copyrights in Kenya. The Kenya Copyright Board created under the Act is responsible for the registration of copyrights.
A successful registration process involves the provision of prescribed details through a prescribed application process and the payment of predetermined fees. The process concludes with the issuance of a Certificate of Registration after a rigorous verification process of the copyright by the Copyright Board.
Enforcement and Remedies
In the event of an infringement, a copyright holder is entitled to institute court infringement proceedings, and must prove the alleged infringement in order to obtain the desired legal relief.
Courts may issue preservation orders where it can be demonstrated that a party in possession of infringing documents is likely to destroy or mutilate the documents to frustrate the enforcement of legal reliefs.
A trade secret is recognised and protected if it relates to information that is kept a secret and not readily available to categories of persons that would find the undisclosed information crucial for their trade, or to information that has commercial value and reasonable steps have been taken to keep the information undisclosed or a secret.
In Kenya, there is no specific statute that relates to the regulation of trade secrets. Trade secrets are protected by application of common law and equity.
There are laws that contain provisions that can be invoked for the protection of trade secrets by virtue of such provisions recognising the right to privacy and the flexibility of parties to enter into contracts and create obligations defining the extent to which a party can deal with trade secrets arising from contractual relationships. Such laws include the Constitution of Kenya, the Law of Contract Act, the Contracts in Restraint of Trade Act and the Computer Misuse and Cybercrimes Act.
The owner of a trade secret does not have a claim against a party that independently discovers the trade secret. The rationale is that there would ordinarily be no agreement between such parties in relation to the trade secret or any binding confidentiality obligations. As long as a party discovers a trade secret independently and honestly, such party cannot be prevented from using the discovered information.
In view of the contractual obligation arising in an agreement to protect a trade secret, a trade secret owner would have a right to sue for breach of such agreement. Reliefs that may be claimed include compensation by way of damages for losses suffered as a result of a breach of agreement.
The length of protection of a trade secret varies depending on the choice of the owner of a trade secret, as may be defined in a non-disclosure agreement. In the absence of an agreement, consideration is placed on what would ordinarily constitute a reasonable period depending on the factors unique to a particular case.
In relation to computer software and technology, the Computer Misuse and Cybercrimes Act of Kenya protects trade secrets embedded in computer systems. The Act makes the misappropriation of trade secrets a criminal offence which, if proven, attracts a penalty in the form of a fine or imprisonment. The Computer Misuse and Cybercrimes Act also prohibits electronic industrial espionage and subjects any violation of the provision to a penalty in the form of a fine or punishment by way of imprisonment. It is also a criminal offence in Kenya to engage in industrial espionage by way of burglary and theft.
The main law applicable to data protection in Kenya is the Data Protection Act No. 24 of 2019 (DPA).
The Act was enacted to enforce Article 31 of the Kenyan Constitution, which requires that information relating to a person’s family or their private affairs would not be unnecessarily required or revealed. Article 31 seeks to safeguard against the infringement of the right to privacy, including privacy of communications.
Accordingly, the DPA regulates the processing of information, although such processing is limited to personal data of natural persons. Juristic persons may not rely on the DPA to enforce their right to privacy.
Processing is defined to mean operations, whether automated or not, that include collection, recording, organisation, structuring, storage, adaptation or alteration, retrieval, use, disclosure by transmission, dissemination or otherwise making available, restriction, erasure or destruction.
The DPA applies to the processing of personal data by a data controller or data processor who is established or ordinarily resident in Kenya and processes personal data while in Kenya, or by a data controller or data processor who is not established or ordinarily resident in Kenya but is processing personal data of data subjects located in Kenya.
A data controller is defined to mean a natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purpose and means of processing of personal data. On the other hand, a data processor means a natural or legal person, public authority, agency or other body that processes personal data on behalf of the data controller.
The main functions of the Data Commissioner are to oversee the implementation and enforcement of the DPA, to maintain a register of all data controllers and processors, to oversee data processing operations, inquiring through assessment whether data processors are processing information legally, to inspect entities to ensure compliance, to undertake research around the development of data processing and to perform other incidental functions.
The Data Commissioner has the power to carry out audits to ensure compliance with the DPA and/or to conduct investigations on their own initiative or on the basis of a complaint by a data subject that their rights have been violated.
A data subject aggrieved by the conduct or decision of a data controller or data processor may lodge a complaint with the Data Commissioner, either orally or in writing. Upon receipt of a complaint, the Data Commissioner will have 90 days to conduct investigations and conclude the matter. For the purpose of the investigation, the Data Commissioner may summon a person to be examined orally, or summon such person to produce any necessary documentary and electronic evidence or sworn affidavit for the purposes of reaching an informed decision.
Where the Data Commissioner finds a person to have breached the provisions of the Act, they may issue either an enforcement notice or a penalty notice.
An enforcement notice directs a data controller or data processor to take appropriate remedial steps in respect of the breach within a specified timeline, which shall not be less than 21 days. Failure to comply with an enforcement notice is an offence for which, upon conviction, a person is liable to a fine not exceeding KES5 million or to imprisonment for a term not exceeding two years, or both.
On the other hand, a penalty notice requiring the person to pay an administrative fine may be issued, having taken the following into consideration, amongst other matters:
The maximum financial penalty that may be imposed by the Data Commissioner is KES5 million or, in the case of an undertaking, up to 1% of the annual turnover of the preceding financial year, whichever is lower.
Any administrative action taken by the Data Commissioner may be appealed to the High Court.
Kenya has positioned itself as the leading economic and business hub in the Eastern African Region. This is primarily due to various measures taken by the Government of Kenya (the GOK) to improve the ease of doing business, as well as President Uhuru Kenyatta's "Big 4" agenda, which focuses on enhancing food security, manufacturing, universal health coverage and affordable housing.
The recent legislative and economic reforms (seeking to achieve the above goals) are set out below, including highlights of how the COVID-19 coronavirus pandemic (COVID-19, or the Pandemic) has affected such reforms.
Business Set-up and Regulation Changes
To make the process of company incorporation in Kenya easier and faster, the Business Registration Service (BRS) was established under the Business Registration Service Act 2015. The BRS recently introduced a one-day, one-step registration process on the GOK's online "e-Citizen" business portal.
Previously, one had to apply to reserve a business name and, if the name was available, it would be reserved for 30 days (extendable for a further 30 days). One would then complete the requisite registration forms and apply to register the entity on the e-Citizen portal.
Now, an applicant must submit to the e-Citizen portal five names (in order of priority) that it proposes to use, fill in the required registration details and print out the registration forms for signature. The applicant must provide specific details of the type of business to be undertaken and confirm whether the business is regulated. If regulated, the applicant must upload a letter of no-objection from the relevant regulator in respect of the proposed registration. Once signed, the applicant must upload the documents onto the e-Citizen portal and pay the relevant registration fees. As soon as the application is processed, the first available name from the five names submitted is automatically assigned to the business entity that is being registered.
Furthermore, in a bid to enhance transparency in business ownership, Kenya's Companies Act was amended in 2019 by the Companies (Beneficial Ownership Information) Regulations 2020 (the BOI Regulations), which require a company to maintain a register of its beneficial owners containing prescribed information relating to such persons. Under the BOI Regulations, a company's beneficial owner is any natural person who directly or indirectly (i) holds at least 10% of its issued shares; (ii) exercises at least 10% of its voting rights; (iii) holds a right to appoint or remove a director; or (iv) exercises "significant influence or control" over the company. "Significant influence or control" means "participation in the finances and financial policies of a company without necessarily having full control over them."
The BOI Regulations require a company to, among other things, identify beneficial owners, obtain details of such persons, maintain (update) a Register of Beneficial Owners in line with its updated Register of Members and file any changes to the same with the Registrar of Companies. It is an offence for a company to fail to maintain such Registers and file changes with the Registrar, attracting a fine of up to KES500,000.
Finally, to facilitate the ease of doing business in Kenya, the Business Laws (Amendment) Act, Number 1 of 2020 (the BLAA) amended various laws. A key amendment relates to the Occupational Safety and Health Act 2007 (OSHA) to allow new businesses with fewer than 100 employees to operate without registration of a workplace for a period of one year from the date of registration of the business. This will give small and medium-sized businesses more time to register their workplaces. The BLAA also amends the Companies Act to remove the requirement on the part of a company to have a common seal and to execute documents using such seal.
Recent Foreign Investment Initiatives
The GOK has continued to focus on boosting foreign direct investment into Kenya and, consequently, the Ministry of Industry, Trade and Cooperatives launched the National Investment Policy (the NIP) in November 2019. The NIP seeks to:
The banking sector is one of the major drivers of economic development in Kenya. Key reforms to this sector are as follows:
The CBK has adopted various measures in response to COVID-19, including increasing the cash reserve ratio (the CRR) by the Monetary Policy Committee from 4.25% to 5.25%, causing the disbursement of KES35.2 billion to banks to directly support distressed borrowers. In addition, relevant financial institutions must always observe the daily CRR requirement of 3% and the monthly average CRR of 4.25%. The CBK has urged financial institutions to consider offering individual borrowers relief on their personal loans due to circumstances directly attributable to the Pandemic. Also, banks are to cover the costs relating to the restructuring of loans, and should not charge any fees to customers for the transfer of money between mobile money wallets and bank accounts.
To encourage compliance with the Employment Act, the National Employment Authority (the NEA) published a notice on 26 June 2019, requiring employers to file returns (with requisite particulars of employees) with NEA, for the period ending 31 December 2018, on or before 8 July 2019. Previously, employers did not file such returns because no government institution was enforcing this requirement.
Since the entire Kenyan workforce has been adversely affected by COVID-19, the Pandemic Response and Management Bill 2020 (the Bill) proposes, among other things, that even when a pandemic adversely affects the ability of an employer to pay salaries or wages, an employer may not terminate a contract of service, dismiss an employee, or coerce an employee to take a salary cut. The Bill also proposes that an employer should permit an employee to take a leave of absence without pay for the duration of the pandemic.
If passed into law, this will limit employers' options in addressing reduced work and cash flows, such as downsizing. It also raises questions concerning payments due to employees in the case of insolvency, and structuring redundancies. The Bill is still undergoing debate by the Senate, and further amendments may be made that affect labour relations.
Developments in Competition and Antitrust Law
The GOK has consistently sought to strengthen governmental institutions to facilitate the ease of doing business and healthy competition. Significant developments in this regard include the publication of the Competition (General) Rules, 2019 (the Competition Rules) by the Competition Authority of Kenya (CAK) to assist in the interpretation of the Competition Act, 2010. The Competition Rules made the following significant amendments relating to merger filings.
The following mergers require full notification and the approval of the CAK:
The following mergers are excluded from the full notification process but require the approval of the CAK:
The following mergers do not require any approval from the CAK:
The Competition Rules also introduce new filing fees, paid to the CAK for notifiable mergers, and clarify how to determine the value of assets or the gross annual turnover of the merging parties.
Given the CAK's concerns over the negative influence that certain businesses have over suppliers, the Competition Amendment Act came into force in December 2019. The key amendments describe instances of abuse of buyer power and require agreements between a buyer and supplier to incorporate certain terms in order to avoid such abuses of buyer power. They also empower the CAK to investigate, monitor and impose reporting requirements and a binding code of practice on sectors likely to witness abuses of buyer power. The amendments also seek to prevent the abuse of bargaining or buyer power that maliciously affects the economy, and empower the CAK to investigate and take action against such conduct.
Finally, in order to safeguard competition and protect consumers from unfair and misleading market practices during the Pandemic, the CAK published a cautionary notice in March 2020 prohibiting collusive increases of prices and hoarding with the intention of raising the prices of various consumer goods. Persons contravening such notice face remedial orders requiring them to contact and refund all consumers who purchased goods at inflated prices.
Development Relating to Intellectual Property
As intellectual property continues to have increasing value for business, recent changes to IP-related legislation will have several implications for IP owners. The significant reforms include:
Public Private Partnerships (PPP)
The National Treasury published the Government Support Measures (GSM) Policy in October 2018 to set out the conditions under which the GOK may grant financial support to improve the bankability of PPP projects. From 2019, the National Treasury requires that all letters of support issued for PPP projects must comply with the GSM Policy.
In response to the effects of COVID-19 on PPP projects, the GOK requires negotiating parties seeking to adjust negotiation and implementation programmes for PPP projects to (i) seek approval from the Cabinet Secretary of the National Treasury to deviate from the provisions of the Public Private Partnerships Act, 2013 and (ii) where applicable, seek approval in writing from the parties to a signed PPP project agreement to avoid falling in breach of the agreement.
Based on the GOK's vision to improve universal healthcare under the "Big 4 Agenda", the Health Laws (Amendment) Act, 2019 came into force on 17 May 2019 and amended all health laws. The amendments effectively reconstituted the boards of the respective health institutions under those statutes, set out the distinct roles and functions of such boards in the regulation of the health sector, and set out new licensing requirements which all health professionals and health institutions must comply with, within the set timelines, to avoid disruption to their operations and to avoid incurring penalties for non-compliance.
To curb the spread of COVID-19, the Ministry of Health and other organs of the GOK have implemented various measures, some of which are highlighted below. Under the Public Health Act and the Public Order Act, the GOK introduced preventative measures, including the nationwide curfew, cessation of movement into or out of certain counties, restrictions while using public transportation, and the individual use of protective masks when in public. Failure to adhere to the preventative measures attracts a criminal penalty.
Furthermore, the Public Health (Prevention, Control and Suppression of COVID-19) Rules, 2020 introduced control directives relating to the isolation, quarantine, testing and treatment of persons suspected to be carriers of COVID-19. Failure to comply with the control measures attracts a criminal penalty.
Finally, the Public Finance Management (COVID-19 Emergency Response Fund) Regulations, 2020 established a COVID-19 Emergency Response Fund, which is set up to mobilise resources for an emergency response towards containing the spread, effect and impact of COVID-19.
Significant legislative reforms occurred in the energy sector in the past year as a result of the Energy Act, 2019 (the Energy Act), which came into force on 28 March 2019, repealing the Energy Act, 2006 (the Repealed Act), the Geothermal Resources Act and the Kenya Nuclear Electricity Board Order No. 131 of 2012 (together, the Repealed Laws). The Energy Act:
Following the recent discovery of commercially viable oil deposits in Northern Kenya, the Petroleum Act came into force on 28 March 2019, repealing the Petroleum (Exploration and Production) Act. The Petroleum Act absorbs and expands the provisions in the repealed Petroleum Act concerning upstream petroleum. It provides a framework for the contracting, exploration, development and production of petroleum (still regulated by EPRA). The Petroleum Act governs the sharing of revenue from petroleum operations between the national government, county governments and communities. It also establishes the National Upstream Petroleum Advisory Committee to advise the Cabinet Secretary for Petroleum and Mining on upstream petroleum operations.
Notably, Kenya Power and Lighting Company (KPLC), Kenya's primary electricity supplier, suspended the signing of new PPAs for the purchase of generated electricity from power producers in January 2019. Power purchasers seeking to engage KPLC to purchase electricity should consider this.
Recent Fiscal Developments
COVID-19 necessitated immediate fiscal intervention to cushion the economy. It is in this context that the Tax Laws (Amendment) Act, 2020 (the TLAA) was passed into law on 25 April 2020. This legislation has introduced several changes to the Kenyan tax regime, including the following:
These changes effectively reduce the tax payable by resident individuals and will increase the take-home pay of low income and high-income earners.
More changes are expected under the Finance Act, 2020 (to come into force on 30 June 2020) as required under the Pubic Finance Management Act.