What every company should be checking throughout the year
For many companies, corporate compliance begins and ends with the annual return. Once the annual return has been filed, the company is often considered to have “done its compliance” until the same time the following year. That approach is increasingly difficult to justify. A company’s statutory obligations do not arise only once a year. Some are annual, while others are triggered by specific events such as the appointment or resignation of a director, transfer or allotment of shares, a change in beneficial ownership, creation of a charge, change of registered office or other alteration to the company’s particulars.
The more useful question is not simply whether a company has filed its annual return. It is whether the company’s statutory records and filings continue to accurately reflect the company as it exists and operates. Where the business changes, its corporate records may also need to change.
This Legal Alert highlights key company secretarial compliance matters that companies in Kenya should monitor throughout the year and explains why periodic reviews—whether monthly, quarterly or otherwise appropriate to the business—can help identify and address compliance gaps before they become more serious corporate or transactional problems.
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Annual Compliance is only one part of the picture
The Companies Act, 2015 and the Regulations made under it impose a range of continuing obligations on companies concerning their directors, members, share capital, beneficial owners, statutory registers, annual returns and other corporate information. The Companies Registry, administered by the Business Registration Service (BRS), maintains the official record of companies and has a compliance and enforcement role under the applicable legislation.
Annual returns are an important part of this framework. They require companies to provide prescribed information to the Registrar and ensure that the Registry has current information about the company. However, an annual return is essentially a snapshot of the company at a particular point in time. It does not remove the need to deal with changes that occur after the return is filed.
For example, a company may file its annual return in January and subsequently appoint a new director in March, transfer shares in April, change its registered office in May and undergo a change in beneficial ownership in June. The company may have filed its annual return correctly, but its corporate records will still require attention because its circumstances have changed. The important distinction is this: annual compliance deals with recurring statutory obligations, while event-driven compliance deals with changes that occur during the life of the company.
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Keeping ownership and management records current
Changes in directors and shareholders are among the most common corporate events requiring proper documentation and, where applicable, notification to the Registrar. When a director is appointed, resigns or otherwise ceases to hold office, the company should ensure that the necessary corporate approvals, records and statutory notifications are properly dealt with. The same principle applies to changes in directors’ particulars. An outdated record can create unnecessary uncertainty, particularly where questions arise concerning who is authorised to represent or bind the company.
Shareholding should be treated with the same degree of care. Share transfers, allotments, transmissions and other changes affecting the company’s issued share capital should be properly documented and reflected in the company’s statutory records and relevant Registry filings. The register of members, share certificates, transfer documentation, board or shareholder resolutions and Registry information should tell a consistent story.
This becomes particularly important when a company is preparing for investment, financing, acquisition or another business/financial transaction. A discrepancy that remained unnoticed for years can suddenly become a due diligence issue requiring rectification before the transaction can proceed. Corporate records should not be updated because a transaction is approaching; they should be maintained so that the company is always ready when an important transaction does arise.
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Beneficial ownership is a continuing compliance issue
Kenyan law requires companies to maintain information concerning their beneficial owners and to keep that information appropriately updated. The beneficial ownership framework has also been strengthened through subsequent legislative developments, including amendments relating to beneficial ownership information, nominee arrangements and record-keeping.
A beneficial owner is not necessarily limited to the person whose name appears on the company’s share certificate. The analysis may involve ownership, voting rights, the ability to appoint or remove directors, significant influence or control and other circumstances prescribed by law. A company should therefore consider whether a change in shareholding, voting arrangements, ownership structure, trust arrangement, nominee relationship or control has affected its beneficial ownership position.
Beneficial ownership compliance should not be regarded as a one-time filing undertaken at incorporation. It is an area that should be reviewed whenever there is a material change in ownership or control and periodically as part of the company’s broader compliance process. This is particularly relevant given the BRS’s increased attention to corporate compliance. In October 2024, the Registrar issued a compliance notice through https://brs.go.ke/notices/ concerning companies identified as potentially non-operational or non-compliant, including companies with significant arrears in annual returns and financial statements and companies that had not complied with beneficial ownership requirements. The BRS continues to maintain compliance notices and related mechanisms through which companies can determine whether they have been identified for compliance action.
The lesson for companies is straightforward: beneficial ownership information should reflect the reality of ownership and control, not merely the information that was correct when the company was incorporated.
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Statutory registers and corporate records matter
A company’s compliance obligations extend beyond what is filed at the Companies Registry. Companies are required to maintain appropriate statutory registers and corporate records, including records relating to members, directors, beneficial owners and charges, together with minutes, resolutions and other documents required by law.
These records are sometimes treated as administrative paperwork, which should not be the case. They provide the documentary history of how the company has been owned, managed and governed. Consider a company that has operated for ten years but has no properly maintained record of several historical share transfers or board decisions. The problem may remain invisible while the business is operating normally. It becomes much more significant when the company is sold, an investor conducts due diligence, a shareholder dispute arises or the company needs to establish who had authority to approve a particular transaction.
Proper company secretarial practice therefore provides an institutional memory for the business. Directors and shareholders may change, employees and advisers may leave, but the corporate record should preserve the history of the company and the basis upon which important decisions were made.
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What should a company review during the year?
A practical company secretarial review should consider both recurring and event-driven obligations. The frequency of the review can depend on the size, structure and level of activity of the company. A company with frequent changes in ownership, directors or transactions may benefit from a monthly review, while a less active company may adopt a quarterly review, alongside its annual compliance calendar.
At each review, the company should consider whether there have been changes to its directors, shareholders, beneficial owners, registered office, share capital, business particulars or other corporate information. It should also check whether any annual returns or other statutory filings are due or outstanding, whether the statutory registers remain current, and whether important board or shareholder decisions have been properly documented.
The review should also consider whether the company has entered into transactions that require corporate approvals or further filings, including financing arrangements, creation of charges, restructuring, investment transactions or changes in ownership and control. The objective is not to create unnecessary administrative work but to ensure that the legal record of the company keeps pace with the commercial reality of the business.
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What can happen when company secretarial compliance is neglected?
The consequences of poor corporate housekeeping are not always immediate. That is precisely why compliance gaps can remain undetected for years. The problem may only become apparent when the company requires a bank facility, seeks investment, enters into a significant transaction, prepares for a merger or acquisition, faces a shareholder dispute or undergoes regulatory scrutiny.
At that point, an outdated director record, missing resolution, inconsistent shareholding information, unfiled annual return or incomplete beneficial ownership information can result in delays, additional professional costs and, depending on the circumstances, regulatory consequences.
More importantly, poor records can create uncertainty about the company itself: who owns it, who controls it, who is authorised to act for it and whether key decisions were properly made. Company secretarial compliance is therefore not simply about avoiding penalties. It is about maintaining a company that is legally organised, transaction-ready and capable of demonstrating how it is owned and governed.
HOW ESK ADVOCATES LLP CAN SUPPORT YOUR COMPANY
At ESK Advocates LLP, we approach company secretarial services as an ongoing corporate compliance function rather than a once-a-year filing exercise. We can assist companies with annual returns and other statutory filings, maintenance and review of statutory registers, beneficial ownership compliance, changes in directors and shareholders, share transfers and allotments, corporate resolutions and minutes, changes to company particulars, corporate restructuring and rectification of historical compliance gaps.
We can also undertake periodic corporate compliance reviews to identify outstanding filings, inconsistencies between the company’s internal records and the Registry, changes requiring notification and areas where the company’s corporate governance documentation requires attention. For companies preparing for investment, financing, acquisition, restructuring or other significant transactions, we can undertake a corporate housekeeping exercise to identify and address compliance issues before they become obstacles during due diligence.
Our approach is practical: identify the issue, determine the required action, rectify it and put in place a system to reduce the likelihood of the same issue recurring.
By Teresia Wamaitha
