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 of 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 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, as follows:
There are further restrictions on shareholding by foreigners in companies undertaking business in aviation, 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 conditions on the repatriation of foreign currency by foreign investors. The transfer should be by the holder of a certificate of an approved enterprise, and should be in the approved currency and at the prevailing exchange rate. In addition, 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 a fine or a term of imprisonment, or both.
In sectors with restrictions on shareholding (aviation, 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, either in accordance with the legislation governing the particular sector or in accordance with legislation relating to public procurement.
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 in place, 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 processes for a company and an LLP both require prescribed documents to be filed with the Companies Registry, and a fee to be paid thereto. 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 for a company is as follows:
The process for an LLP is as follows:
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 (ie, pierce the corporate veil) 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.
Within the last year, the Employment (Amendment) Act, 2021 has also introduced pre-adoptive leave entitlement of one month for employees entering into an adoption arrangement with adoptive societies. The employee is required to provide 14 days’ notice of the adoption society's intention to place the child into their custody in order to qualify for the entitlement.
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 the employee's 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.
If 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% for monthly income exceeding USD240 and the highest rate being 30% for monthly income exceeding USD324. 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 Rates
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, buildings used for manufacture and petroleum and gas storage facilities, the rate is 50% in the first year of use and 25% per year on a 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% per year on a reducing balance basis.
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, he 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:
Failure to obtain a CAK exclusion (exemption) or approval where required would render the transaction void and of no legal effect. Furthermore, it is an offence to implement a merger in Kenya without prior CAK exclusion or approval where required; upon conviction, the liability is imprisonment of up to five years and/or a fine of up to KES10 million, as well as an additional 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.
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 five 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. 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 that 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:
Abuse of Buyer Power
Buyer power is generally defined as the influence exerted by an undertaking or group of undertakings in the position of a purchaser of a product or service to obtain more favourable terms from a supplier, or to impose a long-term opportunity cost including hard or withheld benefit which, if carried out, would be significantly disproportionate to any resulting long-term cost to the undertaking or group of undertakings. Any conduct amounting to abuse of buyer power is expressly prohibited. Abuse of buyer power contrary to the Act attracts a penalty of up to five years' imprisonment and/or a fine of up to KES10 million.
The CAK is empowered to conduct an inquiry into any matter relating to abuse of buyer power, and to investigate conduct that is alleged to constitute an abuse of buyer power. In determining cases related to abuses of buyer power, the CAK is required to take into account all relevant factors, including the nature and determination of contract terms between the concerned undertakings; the payment requested for access to infrastructure; and the price paid to suppliers. The Act currently provides a non-exhaustive list of conduct that amounts to abuse of buyer power, which includes:
The CAK may monitor the activities of a particular sector or undertaking that experiences or is likely to experience an abuse of buyer power and ensure compliance by imposing reporting and prudential requirements. The CAK may also require industries and sectors where incidences of abuse of buyer power are likely to occur to develop a binding code of practice. Agreements between buyers and sellers (which guide the CAK when investigating complaints relating to abuse of buyer power) are required to include the following:
The CAK may also take oral agreements into account.
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 the following:
Length of Protection
A patent is valid for 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 patent's compliance with the requirements of the Industrial Property Act (IPA). Where a patent application is not accepted, the applicant will be informed by KIPI of the reasons for non-acceptance, and will be given 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 IPA. The IPA empowers 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 the 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 mark 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 audio-visual 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 is not readily available to categories of persons that would find the undisclosed information crucial for their trade, or if it relates 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 the 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 that are 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 the 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 the personal data of data subjects located in Kenya.
A data controller is defined as 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. A data processor is defined as 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.
The Kenya Law Reform Commission has put forward the Employment (Amendment) Bill, 2019 (the Bill), which seeks to make fundamental amendments to the substantive legal framework governing the employment relationship in Kenya.
While the recommendation for adoptive leave captured in the Bill has already been implemented in the Employment (Amendment) Act, 2021, entitlements such as those of surrogacy leave and compassionate leave where a still birth has occurred are yet to be incorporated into Kenyan employment laws.
The Bill also seeks to further protect employees from exposure to sexual harassment by requiring employers with more than five employees to prepare a sexual harassment policy. This amendment would effectively increase the scope of applicability of this protection, as the existing Employment Act only requires employers with more than 20 employees to ensure such a policy is in place.
In relation to mergers and acquisitions, the Bill seeks to provide for the protection of employees by requiring a new undertaking to uphold the existing obligations to the employees, and by requiring the recognition of any existing collective bargaining agreements.
It remains to be seen whether these amendments will be incorporated fully into the existing legal framework as pertains to employment laws.
Telecommunications and Data Protection
After Kenya’s Data Protection Act, 2019 (DPA) entered into force on 25 November 2019, the following steps have been taken in the past year to implement it.
The above efforts are important since they will assist in guiding various stakeholders on compliance with the DPA.
National Information Communications and Technology Guidelines 2020 (the 2020 ICT Policy)
The 2020 ICT Policy was published on 7 August 2020, repealing the 2006 ICT policy. It sets out the Government’s objectives and plans in the ICT sector, with the main highlights being as follows.
New local equity participation threshold
The 2020 ICT Policy provides that only companies with at least 30% substantive Kenyan ownership (the 30% Local Ownership Requirement) will be licensed by the Communications Authority of Kenya (CA). This is an increase from the 20% local ownership requirement required under the 2006 ICT policy.
All CA licensees must comply with the 30% Local Ownership Requirement as follows.
However, the 2020 ICT Policy does allow licensees to apply to the relevant cabinet secretary for an extension of the three-year grace period or total exemption from the 30% Local Ownership Requirement.
To promote development of the ICT sector in Kenya, the government is committed to introducing fiscal incentives to stimulate increased investment and growth in the ICT sector, as follows:
Public-Private Partnerships (PPPs)
To solve the current institutional and governance challenges affecting the successful implementation of PPPs in Kenya, the PPPs Bill, 2021 was published on 12 March 2021 and proposes to repeal the current PPPs Act. The PPPs Bill has the following features:
If passed into law, the PPPs Bill should improve Kenya’s track record of implementing PPP projects.
The COVID-19 pandemic led to increased adoption of technology in delivering healthcare services. The Kenya Medical Practitioners and Dentist Council (KMPDC) started issuing provisional approvals for various registered and licensed health institutions to offer virtual medical services.
KMPDC has approved about 20 health facilities to offer telemedicine services in Kenya (virtual consultation health services, for now). Such approvals are subject to review every three months from the issue date and are conditional upon KMPDC’s satisfaction that such telemedicine services are aligned to data protection and medical records regulations.
There are currently no laws regulating telemedicine. However, KMPDC developed e-Health guidelines in 2019, and shared them with the relevant government authorities for approval. Furthermore, KMPDC is reviewing the Code of Conduct for medical and dental practitioners to align it to the developments in telemedicine.
Developments in Competition and Antitrust Law
Informant Reward Scheme Policy
The Competition Authority of Kenya (CAK) published the "External Guidelines on the Informant Reward Scheme Policy" (the Guidelines) to regulate the processing and granting of rewards to informants. The Guidelines took effect on 1 January 2021 and seek to help the CAK to enforce the Competition Act, including investigating restrictive trade practices.
The Guidelines define a "Confidential Informant" as "any person, either natural or juristic, who provides relevant, useful and credible information to the CAK regarding violations of competition law and regulations and from whom the CAK intends to obtain additional useful and credible information for the purposes of any investigation which the CAK decides to carry out." This wide definition effectively covers all whistle-blowers, including employees of undertakings who would be privy to such insider information.
Notably, the Guidelines provide that a Confidential Informant should not have participated directly in the conduct under investigation. This is because such persons are already covered under the Leniency Programme Guidelines, which encourage undertakings engaged in wrongdoing to provide direct evidence and proactively co-operate with the CAK in bringing successful enforcement action, in return for full or partial immunity.
If the CAK is satisfied that the information provided by the Confidential Informant is credible, it shall pay the Confidential Informant a one-off sum at the end of its investigation. The compensation shall be up to 1% of the administrative penalty but not more than KES1 million (about USD10,000).
Draft Joint Venture Guidelines
In early 2021, the CAK published for public comment the draft Joint Venture Guidelines under the Competition Act (JV Guidelines), which seek to guide market participants on what qualifies as a full-function JV and when the CAK’s approval is required before establishing a JV, among other things.
The JV Guidelines define a "JV" as the integration of operations between two or more separate firms, where the following conditions are present:
The JV Guidelines recognise that, in some instances, competitors combine their resources to achieve more efficiency or branch into new markets, but confirm that such collaborations do not reduce competition.
Despite the good intentions of the JV Guidelines, a few issues require further clarification. For example, the following remain unclear:
The CAK is expected to clarify these and other issues after it receives comments from the public and relevant stakeholders.
Block Exemption Guidelines
The Competition Act authorises the CAK – with the approval of the Cabinet Secretary responsible for finance – to exempt any category of decisions, practices or agreements by or between undertakings from falling within the scope of restrictive trade practices under Part III of the Competition Act.
Following the COVID-19 pandemic, the CAK issued the draft "Block Exemption Guidelines on Certain Covid-19 Economic Recovery Priority Sectors" (the Block Exemption Guidelines), which seek to have businesses operating in the following key sectors of the economy benefit from the above exemption: manufacturing, private healthcare, healthcare research services, horticulture, farming and export, aviation, travel and tourism.
The aim of the Block Exemption Guidelines is to allow businesses in these sectors to collaborate on post-COVID-19 recovery and to continue to provide essential goods and services. In effect, the Block Exemption Guidelines assist businesses in making a self-assessment (rather than obtaining the CAK’s confirmation) on whether the agreements, decisions or practices that they intend to enter into qualify for block exemption.
COMESA merger filing updates
It is common for parties engaged in cross-border merger transactions (with a Kenyan component) to consider whether such transactions require notification to the COMESA Competition Commission (the CCC).
On 11 February 2021, the CCC issued a practice note on its application of the term "operate" (the Practice Note) under the COMESA Competition Regulations, 2004 (COMESA Regulations) and the COMESA Competition Rules, 2004 (COMESA Competition Rules) and its approach to the application of Rule 4 of the Rules on the Determination of Merger Notification Thresholds and Method of Calculation (COMESA Merger Determination Rules).
Prior to this notice, the COMESA Regulations required parties in a transaction where "both the acquiring firm and target firm or either the acquiring firm or target firm operate in two or more Member States" to seek COMESA’s approval. The term "operate" was not defined in the COMESA Regulations. However, the COMESA Merger Assessment Guidelines of 2014 (the COMESA Merger Guidelines) state that:
The Practice Note now clarifies that the above definition of "operate" no longer applies, as the COMESA Merger Determination Rules – which were enacted after the COMESA Merger Guidelines – take precedence. This means that, when parties to a merger consider whether to notify COMESA of a transaction, they should focus on the thresholds under Rule 4 of the COMESA Merger Determination Rules as follows: "Any merger where both the acquiring firm and target firm, or either the acquiring or the target firm, operate in two or more Member States, shall be notifiable if:
a) the combined annual turnover or combined value of assets, whichever is higher in the Common Market of all parties to a merger equals or exceeds US$50 million; and
b) the annual turnover or value of assets, whichever is higher, in the Common Market of each of at least two of the parties to a merger equals or exceeds US$10 million, unless each of the parties to a merger achieves at least two-thirds of its aggregate turnover or assets in the Common Market within one and the same Member State."
In summary, one should no longer rely on the "operation" threshold under the COMESA Merger Guidelines for the purposes of such notification.
COVID-19’s impact on operations at the Kenya Industrial Property Institute
As part of the COVID-19 prevention measures, the Government directed all state agencies, such asthe Kenya Industrial Property Institute (KIPI), whose mandate is to administer IP rights, to limit their staff levels and to reduce the interaction of their officials with the members of the public and applicants (or their agents).
Prior to COVID-19, filings at KIPI were wholly manual. As part of the COVID-19 prevention measures, KIPI started offering online filing services through its official email address. Although the implementation of the online filing system has been fraught with challenges, it is a welcome step in ensuring that KIPI continues to offer its services with greater efficiency. Therefore, applicants (or their agents) can file and prosecute applications without having to travel to KIPI offices.
However, once the Government eases the COVID-19 protocols and to facilitate the proper maintenance of records at KIPI’s registry, applicants who have used the online filing service may still be required to submit the originals of the documents filed online.
The Intellectual Property Bill, 2020 (the IP Bill)
In the past, Kenya has made efforts to enact legal and institutional reforms to strengthen and protect IP rights. However, a key challenge in this process has been the institutional overlap in the administration of IP rights.
To deal with this problem, the IP Bill seeks to consolidate all laws relating to IP, namely the Industrial Property Act, the Trade Marks Act, the Copyright Act and the Anti-Counterfeit Act. The IP Bill also seeks to merge the three Kenyan IP agencies – the Kenya Copyright Board (KECOBO), KIPI and the Anti-Counterfeit Authority (ACA) – into one agency to be known as the Intellectual Property Office of Kenya (IPOK).
If enacted, the IP Bill will be a welcome step in streamlining the oversight and administration of IP matters in Kenya.
Removal of expired trade marks from the Register of Trade Marks
Under the Trade Marks Act and Rules, the Trade Marks Registry is required to issue a notice to the owner of a trade mark, no less than 30 days and no more than 90 days before the registration period for a trade mark expires, that the mark will be removed from the Trade Marks Register (the Register) unless the registration of the mark is duly renewed.
However, in the past the Registry has not consistently published such notices, which led to numerous marks remaining on the Register despite having expired.
From February 2020, the Trade Marks Registry began the massive exercise of cleaning up the Trade Marks Register by issuing notices to owners of expired trade marks, requiring them to renew the same within the deadlines stated in the notices. The Registry has subsequently published several special editions of the Industrial Property Journal containing details of thousands of trade marks that would be removed from the Register by reason of non-renewal.
This is a progressive step in the process of ensuring that the Register is kept up to date.
Government of Kenya Foreign Investment Initiatives
The Government of Kenya (GOK) and the US Government launched trade negotiations in July 2020 in pursuit of a Free Trade Agreement. GOK seeks to secure a free trade pact ahead of the lapse of the African Growth and Opportunity Act (AGOA) by 2025, which eliminates import tariffs on goods from eligible African nations. However, the negotiations stalled due to the COVID-19 pandemic and the US elections, before picking up again in April 2021. The talks are ongoing. If successful, they could boost Kenya’s long-term economic outlook.
GOK and the UK Government entered into a UK-Kenya Economic Partnerships Agreement (EPA), which was approved by the respective parliaments. In the deal, the UK committed to providing immediate duty-free quota-free access to goods exported from Kenya. Kenya committed to gradual tariff liberalisation of goods, with some domestically sensitive products in Kenya excluded from tariff liberalisation.
Recent Fiscal Developments
The Finance Act, 2020 passed into law on 30 June 2020, bringing the following changes to Kenya’s tax regime.
On 19 April 2021, the High Court granted conservatory orders restraining the Kenya Revenue Authority (KRA) from collecting or demanding payment of Minimum Tax pending the hearing and determination of a petition challenging the constitutionality of the tax.
The programme does not apply to taxpayers currently under audit by the KRA or taxpayers who have been notified of a pending audit. A taxpayer who applies for the amnesty will forego any other remedy, including appealing to the Tax Appeals Tribunal.
The COVID-19 pandemic necessitated the introduction of immediate tax interventions in April 2020 to cushion the economy from the negative effects of the pandemic. These interventions were transient and were reversed in December 2020, when the economy began to show signs of recovery.
The Employment (Amendment) Act, 2021 (EAA) took effect on 15 April 2021, and amended the existing Employment Act to grant employees the right to pre-adoptive leave (of one month with full pay). This is in addition to the right to other statutory leave entitlements.
The EAA requires employees seeking pre-adoptive leave to notify their employers in writing of the intention of an adoption society to place a child in the custody of such employee, at least 14 days before the placement of the child.
Together with the notice, the employee should provide documents showing the intention of the adoption society to place a child in the employee’s custody, including a custody agreement between the employee and the adoption society and an exit certificate. An "exit certificate" is defined as "a written authority given by a registered adoption society to a prospective adoptive parent to take the child from the custody of the adoptive society."
An employee may extend such pre-adoptive leave with the consent of the employer. If the employee takes any other leave with the consent of the employer (if applicable) once the pre-adoptive leave expires but before resuming work, his/her pre-adoptive leave will expire on such extended period.
These amendments are very beneficial to persons seeking to adopt children.