Salient Changes under the Business Laws (Amendment) Act, No. 2 of 2021

The Business Laws (Amendment) Act No. 2 of 2021 (the “Act”) was assented to on 31^st March, 2021 and came into force upon assent. The Act is geared towards streamlining and increasing the ease of doing business in Kenya. The Act has amended various sections of the Law of Contract Act, the Industrial Training Act, the Stamp Duty Act, the National Hospital Insurance Fund Act, the National Social Security Fund Act, the Companies Act and the Insolvency Act.  

We highlight below some of the salient changes brought about by the Act and their potential impact. 

1. The Companies Act No. 17 of 2015

The Act has amended the Companies Act to factor in virtual and hybrid meetings. In addition to conducting physical general meetings, companies can now conduct general meetings either virtually or a hybrid of both. A hybrid meeting is one in which some of the members the same physical location while other members join the meeting through electronic means. A virtual meeting on the other hand will allow all members join and participate in the meeting through electronic means. 

As a result of the new mode of meetings, Section 283 of the Companies Act is amended in that companies will now be required to specify, in the notice, the means of joining and participating in the meeting in the case of a virtual or hybrid meeting. 

This is a laudable change in law bearing in mind the challenging times occasioned by a global health crisis. Companies stand to benefit from this timely and convenient legislative change. 

The Companies has also been amended by deleting Paragraph 11 of the Sixth Schedule relating to company official seals. This amendment effectively does away with the use of company seals by companies. In line with this, Section 3 of the Law of Contract has been amended to correspond with Section 37 of the Companies Act in so far as execution of documents by corporate bodies is concerned.

2. The Insolvency Act No. 18 of 2015 

The Act has amended the provisions relating to moratoria under the Insolvency Act. A moratorium is a period of time during which transactions or legal processes (in respect of companies under administration) are restricted from proceeding without the approval of the administrator or a court. By virtue of the amendments brought about by the Act, companies with large outstanding liabilities under an agreement of one billion shillings or more are now eligible for moratoria. The Act has also amended the duration of a moratorium which will now end after thirty days from and including the day on which the moratorium takes effect, unless the moratorium period is extended. 

These amendments to the Insolvency Act will most definitely afford to companies in distress sufficient time and space to try and sort out their operations and recover from a debt. This is a timely intervention coming against a backdrop of many companies experiencing financial difficulties occasioned by the ongoing global pandemic.  

Conclusions

In conclusions, the amendments seek to improve the ease of doing business in Kenya. In the wake of the Covid 19 pandemic, there has been an increasing need to adopt new measures to give legitimacy to valid business transactions. Also, the need to cushion businesses from the effects of the pandemic have been further addressed to a good extent as a follow up the Business Laws (Amendment) Act of 2020.