DLA Piper

Constitutional. The official currency is the Kwanza (AOA). The official language is Portuguese.

Last modified 11 Apr 2023

A foreign entity may engage employees in Angola with proper payroll registrations, subject to business, corporate and tax considerations. The employer is responsible for withholding from an employee's pay, and delivering to the tax authority, income tax and contributions to Angolan social security. The level of income tax is defined by the government and varies in line with the employee's salary.

Immigration compliance and pre-hire medical examinations.

Permissible

Reference and education checks are permissible.

Criminal and medical checks must be issued by competent authorities, a criminal record must be issued by the home country and a medical certificate must be issued by a doctor in the employee’s home country.

The visa/work permit requirements for overseas nationals to work in Angola are having a recognized travel document valid for the Angolan territory for at least 6 months, being of legal age, not being included in the national list of undesirable persons prohibited from entering into the national territory, not constituting a danger to public order or to social security interests, complying with all health regulations established by the Ministry of Health for entry into the national territory, having an employment contract or promissory employment contract, having a certificate of professional and educational qualifications and curriculum vitae, and obtaining a positive opinion of the competent Ministry.

Indefinite-term contract (which is the rule), fixed-term or open-term (ie, a term contract whose termination date has not yet been defined, but that will be terminated as soon as the underlying need for contracting is no longer verified – for example, as a contract to cover absence), part-time contract, telework contract and contract under service commission regime – a particular type of contract for high-level employees which provides flexibility for termination and is not common. The parties may execute an employment contract for a fixed term or open term, which must be done in writing.  Part-time, fixed-term and open-term employees may not be discriminated against due to their status.

Independent contractor

Independent contractors may be engaged directly by the company or via a personal services company. Engagement may be subject to misclassification exposure. The factors that tend to indicate an individual is an employee (rather than, for example, a self-employed independent contractor) are the existence of a work schedule, the scheduling of vacation, the worker’s legal subordination to the company, the company’s authority, direction and disciplinary powers, control of punctuality and attendance over the individual, integration into the structure of the company and use of work tools belonging to the company, among others.

In the event of misclassification, the relationship may be converted into an employment relationship on a permanent basis, and the employer may be liable to pay a fine for non-compliance.

Agency worker

Agency workers may only be engaged to fulfill a temporary need for work. The agency work contract duration depends on the underlying reason for hiring and does not typically exceed 24 months. Agency workers have the right to equal treatment to employees in relation to pay and other regular benefits.

Employment contracts

Written employment contracts are common but not mandatory, except for fixed-term, part-time, telework and service commission regime contracts as well as contracts with foreign employees and underage employees. Employment contracts cannot contain conditions that are less favorable to employees than mandatory employment legislation.

Probationary periods

Permissible.

Employment contracts for an unlimited period of time may be subject to a probation period corresponding to the first 60 days of performance of work; the parties may, by written agreement, reduce or waive this period.

The parties may extend the probation period, in writing, to up to 4 months in case of employees who perform highly technical, complex work that is difficult to evaluate, and to up to 6 months in case of employees who perform management duties.

In an employment contract for a limited period of time, the parties may set forth a probation period in writing, and its duration cannot exceed 15 days in case of non-qualified employees, or 30 days in case of qualified employees. Angolan law does not define qualified and non-qualified, but the common practice is that qualified employees correspond to positions that involve technical complexity, a high degree of responsibility or special qualifications as well as those carrying out functions of trust.

Employers with more than 50 employees must, in order to organize the work and labor discipline, draft and approve employee handbooks, guidelines, instructions, service orders and work rules defining rules for the technical organization of work, performance of work and work discipline, delegation of powers, employee job descriptions, safety, hygiene and health protection of work, performance indicators, a remuneration system, working hours for the several sections of the company or work center, control of entrances and exits and circulation within the premises of the company, and surveillance and control of production.

Employers with 50 or fewer employees may, but are not required to, implement employee handbooks on the matters described above.

Third-party approval

Whenever the employee’s handbook or any other rules and regulations establish rules on performance and discipline, remuneration systems, work performance or safety, hygiene and health protection at work, the employer must forward such regulations for information and registration purposes to the General Labor Inspectorate.

Portuguese. Nevertheless, employment contracts and other documents may be drafted in a bilingual template.

Employees entitled to minimum employment rights

All employees are entitled to minimum employment rights.

Working hours

Maximum daily and weekly working hours are 8 hours per day and 44 hours per week. Overtime pay is required for hours worked in excess of these limits. These limits are inapplicable to employees who perform direction and leadership duties, duties of inspection, or provide direct support to the employer (ie, employees who may be exempt from a work schedule). In case the employee usually performs their work outside the company's premises, an exemption regime may also be agreed upon by the parties, in which case those limits shall not apply. Typically, employees under the exemption regime are entitled to an exemption bonus.

Overtime may occur with an extraordinary increase in workload, to prevent serious damage or if due to majeure force. It is subject to the following maximum limits: (a) 2 hours per day, (b) 40 hours per month and (c) 200 hours per year.

Overtime must be compensated with additional payment (ie, an increase of hourly rates) up to 30 hours per month: 50 percent, 30 percent, 20 percent and 10 percent depending on whether it is a large, medium, small or micro company dependent on number of employees and turnover. A company which is a subsidiary or branch of a company with headquarters abroad always qualifies as a large company. Overtime that exceeds that limit is paid for each hour at an additional 75 percent, 45 percent, 20 percent and 10 percent depending on whether it is a large, medium, small or micro company.

The minimum wage is established by Presidential Decree. It is set out as a general minimum wage, but there is also a minimum wage for trade and extractive industry groups, transport services and manufacturing groups and agriculture groups. Under the Decree currently in force, the general minimum wage is AOA32,181.15. The following sector-specific minimum wages also apply:

  • Trade and extractive industry groups: AOA48,271.73
  • Transport services and manufacturing groups: AOA40,226.44 and
  • Agriculture groups: AOA32,181.15.

Minimum 22 working days per year, plus 12 public national holidays.

Sick leave & pay

Employees are entitled to take off as much time as they need for sick leave. For large and medium companies: In case of incapacity to work due to illness or common accident, pay is required in the amount corresponding to 100 percent of the base salary for a period of 2 months. For as long as the employee is not entitled to protection in case of illness or common accident from the social security authorities, the employer must pay to the employee 50 percent of salary from the 3rd to the 12th month.

In case of small and micro companies: The employee is paid, in case of illness or common accident, the amount of 50 percent of the base salary within 90 days, after which the contract is terminated by expiration if the condition of illness remains.

Maternity/parental leave & pay

A pregnant employee is entitled to a paid maternity leave of 3 months. The amount of the maternity allowance is equal to the average of the 2 best monthly salaries from the 6 months preceding the commencement of the maternity leave. The maternity allowance is paid directly by the employer to the employee and, subsequently, the Social Security services reimburse the employer in full. Fathers are not entitled to any leave on the birth of a child; it is only considered as a justifiable reason for absence from work for 1 day.

Other leave/time off work

Employees may also be entitled to leave for other purposes, such as for their wedding; fulfillment of legal or military obligations which must be performed within the normal working period; attendance to tests by working students; attendance of training, professional proficiency, professional qualification or job conversion courses authorized by the employer; participation in cultural or sporting activities, either in representation of the country or the company or in official contests; the performance of necessary and urgent action in the exercise of leading tasks in labor unions as a union representative or as a member of the employee’s representative body; or the  participation of the employee as a candidate to general or municipal elections approved by the competent authority.

Discrimination based on the following protected characteristics is prohibited: race, color, gender, ethnic origin, marital status, origin or social rank, religious beliefs, political opinion, union affiliation and language.

There is no special provision in this regard in Angola. Protection is only granted in the course of criminal action at the request of a whistleblower or by decision of the Public Prosecutor's Office.

Both employer and employee must pay contributions to social security in Angola to cover various employee benefits (eg, maternity leave payment and retirement pension). The employer must withhold the contribution due by the employee and deliver both contributions (ie, employer and employee) to social security every month.

Current general rates are 3 percent of the gross wage for the employee and 8 percent for the employer.

Employees with a minimum contributory period (ie, 35 years) qualify for a retirement pension at age 60 or in cases of total incapacity.

Employers have no legal obligation to provide complementary or supplementary social benefits in addition to the social coverage provided for by the social public scheme. However, some companies – mostly large companies or multinational companies who have their own schemes worldwide – set up and provide private complementary health and pension schemes to their employees.

The Data Privacy Law No. 22/11, June 17 governs Angolan data privacy and determines, in general terms, how to collect, use, disclose, store and give access to "personal information."

There is no specific regulation on employee data privacy.

Provided that the same business activity is maintained, the new employer takes the position of the former employer in the employment contracts and takes their position in respect of the rights and obligations arising from the employment relationships. This is the case even if the employment contract is terminated before the transfer. The new employer takes their position as the employer of such former employees in respect of due and non-paid credits. All credits, rights and obligations of the employer arising from the execution and implementation of the employment contract, its violation or termination are subject to a statute of limitations of 1 year starting on the day following the day of termination of the contract. Employees keep the same seniority and acquired rights which they had in the service of their former employer.

The new employer undertakes the obligations of the former employer limited to those incurred during the 12 months prior to the modification, provided that, up to 22 business days prior to the modification, the new employer gives notice to the employees that they must claim their credits up to the 2nd business day prior to the date scheduled for such modification. Within 22 business days following the modification of employer, the employees have the right to terminate the employment contract with prior notice, but this does not confer any right to compensation.

Employee representative bodies are permissible but not mandatory.

Trade unions are not common in Angola.

In order to carry out their duties, trade union representatives are entitled to 4 paid hours a month but must notify the employer in advance of the date and number of days they require for the exercise of trade union functions. Employers are obliged to provide a suitable place for workers' meetings whenever this is requested by the union representatives. Special protections against dismissal are granted to employees who perform, or have performed, duties as union representatives, either as leaders or delegates, or members of the employees’ representative body performing union-related activities.

Unilateral termination by the employer: dismissal based on objective grounds (ie, redundancy reasons); disciplinary dismissal with just cause (ie, based on serious breach of the employee's duties).

Termination without cause (with notice): only for employees hired under an employment contract of service commission regime (a particular type of contract for high-level employees which provides flexibility for termination but is not common).

Other termination causes: mutual agreement, termination by the employee (ie, termination with notice or constructive dismissal with just cause), expiration (ie, fixed-term and open-term contracts or retirement).

Employees subject to termination laws

All employees.

Restricted or prohibited terminations

Special protection against dismissal is granted to employees who perform, or have performed, duties as union representatives, either as leaders or delegates, or members of the employees’ representative body performing activities; women covered by the regime of maternity protection; war veterans as per the definition provided by the applicable law; employees under the legal age; employees with a reduced work capacity or with a disability degree equal or higher than 20 percent.

As a general rule, a copy of the notice served on the employee must be forwarded to General Labor Inspectorate.

Third-party approval for termination/termination documents

Except in respect of protected employees, third-party approval is not required to terminate an employment.

Mass layoff rules

If economic, technological or structural circumstances occur, which may be clearly demonstrated and which involve an internal reorganization or conversion, or the reduction or the shutting down of activities, which makes it necessary to eliminate or significantly change job positions, the employer may terminate the employment contracts of the employees who perform such job positions.

Collective dismissal rules are triggered if the dismissal involves at least 20 employees.

Information to the General Labour Inspectorate is required. However, there is no need to obtain approval for termination.

The General Labor Inspectorate may undertake the diligence deemed necessary for clarification of the situation and, in case of a collective dismissal, during the period in which the evaluation of the General Labor Inspectorate occurs, the employer may promote a meeting with the representative body or with the committee appointed for the purpose of exchange of information and clarification and may forward the conclusions of the meetings to the General Labor Inspectorate.

For individual dismissals based on objective grounds (up to 20 employees): the employer must forward, at least 30 days in advance, prior notice of dismissal to the employee or employees who occupy the job positions to be extinguished or transformed.

For collective dismissal: the prior notice is 60 days.

Notice periods in case of term contract: 15 business days if its duration is equal to or higher than 3 months.

Statutory right to pay in lieu of notice or garden leave

Payment in lieu of notice is permitted (and required if the notice period is not honored).

Garden leave is allowed during the notice period.

Fair dismissal based on objective grounds (redundancy/collective dismissal):

  • Large companies: compensation corresponds to 1 base salary for each year of effective service up to the limit of 5 and an additional 50 percent of the base salary multiplied by the number of years of service that exceed such limit
  • Medium companies: compensation corresponds to 1 base salary for each year of effective service up to the limit of 3 and an additional 40 percent of the base salary multiplied by the number of years of service which exceed such limit
  • Small companies: compensation corresponds to 2 base salary and an additional 30 percent of the base salary multiplied by the number of years of service which exceed the limit of 2 years

Fair disciplinary dismissal: no severance.

Higher severance payments may be agreed and are usual as a way to avoid litigation.

A clause of the employment contract which restricts the activity of the employee for a period of time, which may not exceed 3 years from the termination of the contract, is lawful if the following conditions are met: (a) such clause is included, in writing, in the employment contract, or in its addendum; (b) the activity performed may cause real damage to the employer and may be considered as unfair competition; (c) the employee is paid a salary during the period of restriction of work: the corresponding amount will be included in the contract or its addendum, and it must be taken into account, in its calculation, the fact that the employer may have incurred in significant expenses in the professional training of the employee.

A clause which requires an employee who benefits from professional improvement or higher level education at the expense of the employer to remain at the service of the same employer for a certain period of time, provided that such period does not exceed 1 year, in case of training of professional improvement and up to 3 years in case of courses of high level education, is also lawful if established in writing. In this case, the employee may release themselves from remaining at the employer’s service by repaying to the employer the amount of the expenses incurred by the employer, in proportion to the remaining time until the term of the agreed period. The employer that hires the employee within the period of restriction of activity in the company is jointly liable for the damages caused by the employee or for the amount not returned by the employee.

In principle, statutory rights cannot be waived and any waiver of such rights will be null and void.

Discrimination

Fine corresponding to 5 to 10 times the average salary paid by the company.

Unfair Dismissal

The employee may challenge the validity of the dismissal before the labor courts.

If the relevant court declares the dismissal to be unlawful, by final judgment, the employer must immediately re-instate the employee in the same job position and benefiting from the same previous conditions, or, alternatively, shall indemnify the employee (compensation is different depending on whether it is a large, medium, small or micro company and the cause of dismissal).

In addition to re-instatement or the compensation, the employee is entitled to the base salaries they would have received if they had continued to perform work, until the date on which the employee finds a new job or up to the date of final judgment, whichever comes first, with a maximum limit of 6 months of base salary for large companies, 4 months to medium companies and 2 months for small and micro companies.

Failure to inform and consult

Not applicable.

Typically, non-compliance with employment laws leads to administrative proceedings which may lead to the payment of fines. If such non-compliance is based on violation of rights that deserve protection under criminal law, it may also lead to this type of judicial proceedings.

João Guedes

João Guedes

Daniela Rosa

Daniela Rosa

Islândia Ribeiro

Islândia Ribeiro

  • Download current countries
  • Download full handbook

Rules in transactions/business transfers

transfer of business act kenya

Where there is an asset transfer that qualifies as a business transfer, all obligations arising from the employment contracts that the transferor has executed with its employees are taken on by the transferee after the transfer. Employment contracts continue with the transferee and the employees retain their seniority with the transferor and the rights arising from their contracts. In all cases, the employees may provide their written consent before the transfer. Without such consent, the employee may terminate the employment, with the right to compensation.

Although, in practice, both internal consultations and collective consultation with trade unions are required before a business transfer takes place, the transferor and the transferee are not required by law to inform or consult employees on a business transfer.

The transferor and the transferee are jointly and severally liable for any dismissals that arise due to the transfer.

Last modified 10 May 2023

transfer of business act kenya

At common law, employees cannot be transferred from one employer to another without their consent.

Under the Fair Work Act, there are rules which apply if there has been a "transfer of business." The transfer of business rules apply when there is a connection between 2 employers – including the sale and purchase of all or part of a business, certain outsourcing and in-sourcing arrangements and where the 2 employers are associated entities – and the new employer agrees to employ some or all employees of the old employer within 90 days and there has been no significant change to the work performed by those employees. The main effect of the transfer of business rules is that a transferrable instrument (ie, a collective labor agreement, such as an enterprise bargaining agreement) that covered the employee before the transfer will continue to apply after the transfer and all service is regarded as continuous and accrual of leave benefits transfer with the employee, with some limited exceptions. The Fair Work Commission can make certain orders altering the effect of the transfer of business rules if it deems it appropriate.

Last modified 24 Mar 2023

transfer of business act kenya

Automatic transfer under the Austrian rules implementing the EU Acquired Rights Directive in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employees and/or the works council, if any. Any dismissal connected to the transfer is void unless for a good reason.

Last modified 15 Mar 2023

transfer of business act kenya

No automatic transfer principles and no laws covering business transfers. Employees transfer through termination and rehire in an asset deal.

transfer of business act kenya

Automatic transfer under the EU Acquired Rights Directive/Collective Bargaining Agreement no. 32, in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employee representative bodies, or, in absence of employee representative bodies, provide this information directly to employees. Any dismissal connected to the transfer is unfair unless for an economic, technical or organizational reason.

Last modified 30 Mar 2023

transfer of business act kenya

There is no obligation to notify the government before asset or share deals. There are significant restrictions on changing terms and conditions of employment.

transfer of business act kenya

In most jurisdictions, legislation exists which will either:

  • Require the transfer of employees as a result of a sale of a business or
  • Provide that employees who accept an offer of employment with, or simply continue to be employed by, the purchaser will have their employment deemed continuous and their past service honored.

Unless a contract or collective agreement provides a right or option to claim termination amounts, employees accepting a purchaser's offer of employment, either expressly or by continuing in employment, will not be entitled to claim termination amounts from the seller.

transfer of business act kenya

There is no obligation in Chile to inform unions or labor authorities of any transaction or business transfer.

Chilean law permits the transfer of all or part of a business, in which case, in principle, the new company that continues the operations will be considered the employer of the employees who work for that business. Under this scenario, the employees maintain seniority as well as all their rights and obligations under the employment agreements and practices in place with the former company, which must be honored by the new employer.

If the new company must change the employment conditions of the employees who will be transferred with the business, termination of the employment agreement by the transferring company and a new employment agreement with the new company generally are the most suitable solutions.

Last modified 16 Mar 2023

transfer of business act kenya

  No automatic transfer of employment in an associated company transfer or change of business ownership. Therefore, the previous employer must terminate the employee's employment contract, and the new employer must offer – and the employee must accept – employment. If the new employer recognizes the service years with the previous employer, then the previous employer may be able to avoid liability for a severance payment.

transfer of business act kenya

Employment transfers may be implemented via employer substitution or the assignment of employment agreements, or by termination and rehire. Employees transferred by substitution or assignment are entitled to receive at least the same benefits and to perform their work subject to the same terms and conditions as before the transfer. The employer who has been substituted is jointly responsible with the new employer as to the labor obligations arising prior to the employer substitution.

An employer substitution occurs, regardless of the will of the parties, when the following 3 criteria are met:

  • Change of employer (for any reason)
  • Continuity of establishment (understood as the core business of seller) and
  • Continuity of employment agreement.

transfer of business act kenya

Czech Republic

Automatic transfer under the Transfer of Undertakings Directive 2001/23/EC and the Czech Labor Code where there is a transfer of an employer’s activities or tasks, or part thereof. Duty to inform and consult with employees and employee representatives. Protection of employees against significant deterioration of working conditions (ie, significant restrictions on changing terms of employment following transfer and rights to claim severance pay in case of deterioration). Employees cannot be dismissed by virtue of a transfer.

transfer of business act kenya

Under the Danish Act on Employees' Rights, in the event of Transfers of Undertakings, employees' contracts of employment transfer automatically in the event of a business transfer or service provision change.

There are certain requirements for employers to inform and consult with their employees prior to a transfer.

Dismissals due to the transfer of an undertaking, or part thereof, will not be considered reasonably justified unless the dismissal is due to economic, technical or organizational reasons entailing changes in the workforce.

transfer of business act kenya

The Employment Contracts Act stipulates that, on the transfer of an undertaking, existing employees transfer on their existing employment terms. The Act on Co-operation within Undertakings stipulates information obligations as regards to the personnel. Employees cannot be dismissed merely because of a business transfer, and dismissals or change of employment terms are possible only on normal grounds after the transfer. Employees or unions cannot object or prevent the transfer, but an employee who is affected by the business transfer is entitled to resign with a shorter notice period. A share sale is not considered a transfer of undertaking.

Last modified 27 Mar 2023

transfer of business act kenya

Automatic transfer of the employment contract under the EU Acquired Rights Directive/Article L. 1224-1 of the French Labor Code in case of a modification of the employer's legal situation (eg, a sale or merger) and provided the criteria set by case law are met, meaning that it is a transfer of a standalone business that maintains its identity within the transferee.

In case of a partial transfer of undertaking, the transfer of protected employees will require the labor inspector's prior approval.

In share or asset deals, it is required for the impacted companies to consult with their Social and Economic Committee ( Comité Social et Economique or CSE). Between 15 days and 2 months (3 months in rare situations) of consultation may be required depending on the circumstances.

Under certain circumstances, employees of SMEs must be informed of a proposed sale of the business or of shares to give them the opportunity to make an offer, although there is no obligation on the employer's part to accept any such offer.

Last modified 12 Apr 2023

transfer of business act kenya

Automatic transfer of employment under the EU Acquired Rights Directive/Germany's transfer of business (Section 613a of the Civil Code) rules in case of an asset deal or service provision change. Employees shall receive detailed written information prior to the transfer and may object to the transfer within 1 month after receipt thereof.

There is a duty to inform and consult with the works council. Significant restrictions on changing terms and conditions following a transfer exist. Any dismissal connected to the transfer would be unfair; dismissals for other reasons are possible.

transfer of business act kenya

Hong Kong, SAR

No automatic transfer of employment. This includes an associated company transfer or change of business ownership, or a merger situation where the employment entity is changed. Therefore, the previous employer must terminate the employee's employment contract, and the new employer must offer – and the employee must accept – employment. If the employee accepts employment with the new employer or unreasonably refuses employment with the new employer in circumstances where the offer of new employment is on the same terms or terms and conditions no less favorable than those with the previous employer, then the previous employer may be able to avoid liability for a severance payment, subject to satisfaction of other conditions. There is no duty to consult, either individually or collectively, with employees or employee representatives.

transfer of business act kenya

Where there is the transfer of a business, there will be an automatic transfer of employment relationships existing at the time of the transfer. The entire employment relationship, with all rights and obligations, will transfer.

Duties to inform the authorities and to inform and consult with the works council exist. Any dismissal based purely on the fact of the transfer is unfair and unlawful.

These rules do not apply to share deals or to a business transfer when the transferor is subject to a liquidation (ie, insolvency) procedure.

transfer of business act kenya

Indian employment law does not provide for the automatic transfer of employees. ID Act provides that, upon transfer of the ownership or management of an undertaking, every ''workman'' who has been in continuous service in any industry for at least 1 year (ie, 240 days) will be deemed to have been retrenched (ie, terminated) and will be entitled to retrenchment compensation (equivalent to 15 days' average pay for every completed year of continuous service or any part thereof in excess of 6 months) and to receive 1 months' notice or wages in lieu thereof, unless the following applies:

  • The workman consents to their employment being transferred to the transferee
  • The transferee agrees to provide the employee with continuity of service on terms no less favorable than those which applied prior to the transfer

On and from the date of transfer, the transferee steps into the shoes of the transferor and becomes responsible for liabilities and obligations relating to such workmen including central and state taxes, provident fund contribution, gratuity, accident compensation and employee state insurance contribution.

With respect to liabilities prior to the date of transfer, the transferor and transferee both shall, in accordance with ESI Act and EPF Act, be jointly and severally liable to make provident fund and insurance contributions in respect of the period up to the date of the transfer, provided the liability of the transferee is restricted to an amount equivalent to the value of the assets obtained by way of the transfer.

Employees other than workmen usually resign from their service and are reappointed by the transferee unless they do not wish to transfer. In the event the transferee agrees to provide continuity of service, that continuity will then be reflected in the employment contract.

Last modified 17 May 2023

transfer of business act kenya

Employees are not automatically transferred on a business transfer, which includes a merger. Indonesia does not have TUPE or TUPE-style regulations. Employees should be consulted, and the following 3 options are possible in relation to permanent employees:

  • The employee is not willing to continue their employment with the new employer.
  • The new employer is not willing to accept the employee.
  • The new employer and the employee are willing to continue the employment as if no business transfer has occurred, with the employment relationship continuing on the basis of the same terms and conditions (or better) as before the transfer, and usually carrying forward accrued seniority. Employees cannot be given less beneficial terms unless they are terminated by the former employer or made redundant and rehired by the new employer. In that case, the new employer may rehire on its own terms.

Regardless of the reason for termination, in the event of a business transfer as explained above, the employee must be paid a certain amount in severance pay plus a term of service recognition payment, if applicable, and compensation, if applicable.

A non-permanent worker who chooses not to accept a transfer of employment offer, or who is not offered a transfer, is generally entitled to receive the wages for the remaining period of their FTC.

No protection against dismissal for employees in a business transfer. However, as with nearly all terminations of employment, unless the employer and employee reach agreement, the termination must follow the industrial relations dispute settlement procedure before the employee's employment may be terminated, and severance entitlements must be paid.

transfer of business act kenya

The European Communities (Protection of Employees on Transfer of Undertakings) Regulations transpose the Acquired Rights Directive and provide for automatic transfer of employees with undertakings – or parts of undertakings – which retain their identity post-transfer.

On a business transfer, there is also a duty to inform and consult with employee representatives and a prohibition on transfer-related dismissals, unless dismissal is justified on economic, technical or organizational grounds.

transfer of business act kenya

Acquisitions that entail change of ownership will generally not result in changes in employment relations. Transfer of employees to a new employer as part of an asset transfer requires the employees consent. This can be achieved through assumption of employment arrangements by buyer (including seniority-based rights) or through a "fire-rehire" approach (there may still be transfer of residual liabilities deriving from the period of employment preceding the transfer).

transfer of business act kenya

Automatic transfer of those employees who belong to the transferred business or branch of business, without any interruption of the employment, to the transferee, regardless of the employees' consent. The transferred employees maintain all the rights to which they were entitled with the transferor. The transferor and transferee are jointly liable for entitlements that the transferred employees had at the time of the transfer. Duty to inform and consult with employee representatives.

transfer of business act kenya

In an acquisition by business transfer, employees of the selling company will continue as employees of the selling company. If employees are to be transferred to the buyer, it is typical for the employee to resign from the selling employer and then be newly hired by the buyer under a new employment contract executed by the employee.

In a merger, the merged entity will cease to exist, and the surviving entity shall succeed to the contractual obligations of the merged entity, including employment agreements. Consequently, employees of the merged entity will automatically become employees of the surviving entity, keeping terms and conditions of employment including those under the merged entity's work rules.

In a statutory company split, the split of the employees should be handled in accordance with the Labor Contract Succession Act, and some employees may automatically transfer with the business that is being transferred. The splitting company must provide notice, in writing, as to the split-plan or agreement to the employees who will be transferred at least 2 weeks before the company split’s approval. An employee has the right to object within 2 weeks of receiving the notice if they are:

mainly assigned to the target business but not included in the transfer to the purchaser or

not mainly assigned to the target business but included in the transfer to the purchaser.

transfer of business act kenya

Kenya does not have a specific law governing employment on the transfer of a business. Normally, this is treated as a redundancy irrespective of whether alternative employment is offered by the transferee at no less favorable terms with recognition of past years of service with the transferor. Employees are terminated by the vendor, and new employment contracts with the purchaser are to be entered into simultaneously.

transfer of business act kenya

Employees transfer through termination and rehire in an asset deal.

Last modified 1 Apr 0023

transfer of business act kenya

In case of business transfers falling under the scope of the EU Acquired Rights Directive, as implemented in Luxembourg, all employment contracts existing at the date of the transfer must be maintained with the new employer. All employees' rights are maintained and transferred to the transferee.

Duty to inform and consult the employees' representatives and notify the transfer to the ITM.

Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason.

transfer of business act kenya

No provision for automatic transfer of employment. Employees will remain employed by the seller in a sale of business transaction. The "transfer" of employees in a sale of business transaction is effected by a termination (by the seller) and rehire (by the buyer), and in this scenario the seller will be exempted from paying any statutory severance payment if the new offer from the buyer is under terms and conditions of employment not less favorable than those under which the employee was employed by the seller. An employee will not be entitled to statutory severance payment if the employee unreasonably refuses the new offer.

transfer of business act kenya

Employment transfers may be implemented via an employer substitution letter. Employment transfer through substitution of employer is only effective if the assets related to the business are also transferred. Transferred employees are entitled to receive at least the same benefits and perform their work subject to the same terms and conditions as before the transfer. The employer who has been substituted will be jointly responsible with the new employer for a period of 6 months.

transfer of business act kenya

Automatic transfer pursuant to article 19 of the Labor Code in a business transfer.

Information must be sent to the employee's representatives, if any exist in the company, but no authorization or consent is required.

transfer of business act kenya

In the event of a transfer of a business, the employees are automatically transferred to the new employer unless the employees decide to terminate the employment contract. The rights and obligations under existing employment contracts and collective labor regulation instruments, including those arising from an employee's length of service, pass to the new employer.

Communications must be made to the Ministry of Labor and to the trade union, if any, informing them of the transfer, date, reasons, consequences thereof and intention to respect the rights acquired by the employees in the previous labor relationship. The law does not set a minimum time period, but, in practice, it is appropriate for communications to be made 30 days in advance.

Last modified 14 Mar 2023

transfer of business act kenya

There are no specific rules governing employment implications of transactions/business transfers, other than as below.

An employer must pay a statutorily prescribed severance payment to the affected employees in accordance with relevant laws in the case of the employer's breach of contract, liquidation, sale of the business, winding-up the business or reducing the number of workers.

The severance payment is based on the length of time the employee has continuously served the employer, and on the basis of the employee's last salary (without overtime premium). See '' severance " below.   

transfer of business act kenya

Netherlands

Automatic transfer under the EU Acquired Rights Directive/Dutch civil code in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employee representatives. Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason. Works council has the right to advise.

transfer of business act kenya

New Zealand

New Zealand law does not contain any automatic transfer provisions except for a few limited classes of employees.

If a business is sold, transfer of employees depends on the nature of the sale.

Where a business, or part of the business, is acquired by way of an asset and goodwill purchase, the employees do not automatically transfer to the new owner but must agree to do so. Where a business, or part of the business, is acquired by way of a share purchase, the employment of employees remains unchanged.

Special provisions apply for businesses that employ "vulnerable employees."

There are also requirements under the Employment Relations Act 2000 for there to be a process for consultation with staff in business transfer situations. These are called ''Employment Protection Provisions'' and are process requirements only, meaning there is no substantive right to transfer.

Last modified 14 Apr 2023

transfer of business act kenya

No legislation on transaction/business transfers except if provided in the employment contract. Where the contract of employment does not provide for a transfer of undertaking, consent of the employees is required for the transfer of the employment. Termination and rehiring is an alternative.

The Labour Act prescribes that where an employer seeks to transfer any employee to another employer further to a transfer of business, the transfer shall be subject to the consent of the employee and the endorsement of the transfer upon the contract by an authorized labour officer. The Labour Act is silent on when employee consent must be secured. However, it is best practice to secure consent before or at the time the transaction agreement is signed in order to avoid potential issues. This process is only applicable to the class of workers that are covered by the Labour Act, i.e., manual labour or clerical workers.

For other categories of employees not covered by the Labour Act, employers are not required to notify or inform employees prior to entering into transactions for the transfer of a business. The transfer of employees, and any consequential notifications, will therefore depend on the terms of the employment contract.

Last modified 31 May 2023

transfer of business act kenya

Automatic transfer under business transfer regulations. Rights and obligations under the employment contracts are transferred to the new employer. Restrictions on changes to terms and conditions following a transfer. Duty to inform and consult with employee representatives. The transfer is not in itself grounds for dismissal.

Last modified 5 Apr 2023

transfer of business act kenya

Omani employees automatically transfer to the purchaser; however, expatriate employees do not.

transfer of business act kenya

Any corporate reorganization, business purchase, downsizing or any similar matter:

  • Is not a valid cause for individual termination and
  • Should not affect the salary and conditions of the employees involved, unless there is prior written agreement with the employees.

In case of a merger, the change of employer occurs automatically due to the method of transfer, so employee consent is not needed. The employment continues with the surviving company on existing terms. If the surviving company wants to change the existing terms, it must obtain consent in writing from each employee with respect to these new terms.

transfer of business act kenya

Philippines

In a share deal, employment continues.

In an asset deal, the parties may agree to assume the employment agreements, which requires employee consent. Alternatively, employees may be terminated and rehired, which would result in the seller being liable for separation pay the amount of which depends on the grounds for termination (i.e. redundancy, retrenchment or closure of business).

transfer of business act kenya

Automatic transfer of employees under the EU TUPE Directive and the Polish Labor Code. The transferor and the transferee are jointly and severally liable for the obligations resulting from the employment relationships that arose before the transfer of a part of an undertaking. They have certain information and consultation obligations towards the employees and the employees' representatives (ie, trade unions and works council). A transferred employee has the right to terminate their employment relationship within 2 months of the transfer date, without notice, providing 7 days' prior notice. Termination according to this procedure has the same legal effect as if the employment relationship were terminated with notice by an employer. Dismissal solely due to transfer is unlawful. The transferee is obliged to apply any CBA adopted by the transferor and applicable to the transferred employees for a period of 1 year after the transfer date, unless the transferee applies more favorable conditions than those resulting from the CBA.

transfer of business act kenya

Automatic transfer under the EU Acquired Rights Directive and the Portuguese Labor Code in case of change of employer (eg , sale of an independent standalone business unit, merger or spinoff). Right of the employees to maintain the same terms and conditions. The transfer is not by itself a cause for fair dismissal. Duty to inform, and, in case labor measures are planned (eg , change of work center or change of employment conditions), duty to consult with employee representatives. Under certain circumstances, the employee may oppose the transfer or may resign after the transfer, with entitlement to legal compensation (ie, constructive dismissal).

transfer of business act kenya

Automatic transfer under the EU Acquired Rights Directive and Romanian Transfer of Undertaking Law No. 67/2006 (TUPE) in asset deals typically involving a business or undertaking sale. This entails transfer of the rights and obligations arising from the transferred employees' individual employment agreements and the applicable collective bargaining agreement – for its duration – in force on the transfer date. There are restrictions on changing terms and conditions of employment following a transfer. There is a duty to inform and, in certain cases, to consult with the employee representative bodies for both the transferor and the transferee. Any dismissal connected to the transfer is prohibited.

transfer of business act kenya

Employees must consent to a transfer of employment and generally cannot be dismissed because of the transfer. It is possible to terminate the agreements with the general director, their deputy and chief accountant within 3 months of a change of owner in certain instances.

Last modified 9 Aug 2022

transfer of business act kenya

Saudi Arabia

If the ownership of a company is transferred to a new owner, or a change takes place in its legal form through merger, partition or otherwise, the employment contracts shall remain in force, and service shall be deemed continuous. As for the employees' rights accrued for the period prior to the change, such as wages or unrealized EOSG on the date of transfer of ownership, the predecessor and the successor shall be jointly liable.

However, in the case of an asset sale, employees generally transfer through termination and rehire, but the predecessor and the successor may agree to transfer all the previous rights of the employee to the new owner with the written consent of the employee. If the employee disapproves, they may request the termination of their contract and collect their dues from the predecessor.

transfer of business act kenya

Under the EA, EA Employees are automatically transferred if an undertaking or part thereof is transferred from one person to another as a going concern. There are notification and consultation requirements required under the EA relating to the automatic transfer of EA Employees. Non-EA Employees do not transfer automatically and instead must have their employment contractually terminated by the transferor on a business transfer, after which they may then be rehired by the transferee or have their contracts novated.

transfer of business act kenya

Slovak Republic

Automatic transfer of employment under the EU Acquired Rights Directive/Slovak Labor Code's rules applies in case of a transfer of an economic unit (eg via sale of enterprise, or in certain cases via an asset deal).

Employees must receive detailed written information no later than 1 month prior to the anticipated transfer, and may object to the transfer. Duty to inform and consult with employee representatives applies. Significant restrictions on changing employment terms and conditions following a transfer apply. Any dismissal connected to the transfer will be deemed invalid; dismissals for other reasons are possible under the strict rules set forth by the Labor Code.

transfer of business act kenya

South Africa

Employees automatically transfer to the new employer by operation of law in the event of a transfer of a business or service as a going concern. There is no general consultation requirement, and employees transfer on terms and conditions that are, on the whole, not less favorable. Disclosure of information to employees required as well as the conclusion of a written agreement setting out a valuation of the accrued employee-related liabilities, with failure to do so resulting in limited joint and several liability for the 2 employers for a period of 12 months if an employee is dismissed for operational requirements. A dismissal that is related to a transfer is automatically unfair, but dismissals due to genuine operational requirements may still be implemented if the reason for dismissal is unrelated to the transfer.

Last modified 28 Feb 2023

transfer of business act kenya

South Korea

The transferee automatically assumes the transferor's responsibilities with regard to the employees, including their working terms and conditions as well as liabilities, unless the employees otherwise agree. Unless there is just cause, employees are protected against dismissal before or after the transfer.

transfer of business act kenya

Automatic transfer under the EU Acquired Rights Directive and Section 44 of the Workers' Statute in case of change of employer ( eg, sale of an independent stand-alone business unit, merger or spinoff). Right of the employees to maintain the same terms and conditions of employment. The transfer is not by itself a cause for fair dismissal. Duty to inform, and in case labor measures are planned ( eg, change of work center, change of employment conditions, collective dismissal), duty to consult with employee representatives.

transfer of business act kenya

The Swedish Employment Protection Act (EPA) enacts the European Union's Acquired Rights Directive regarding business transfers. The EPA provides that, in the event of the transfer of an undertaking or business, or a part thereof, from one employer to another, the rights and liabilities of the employer are also transferred. The transferor and transferee have a duty to inform and consult with trade unions if the respective company is bound by a collective agreement, or if any trade union whose members employed by the company will be affected by the transfer. Any dismissal connected to the transfer would be in breach of the EPA, unless for an economic, technical or organizational reason.

Last modified 10 Apr 2023

transfer of business act kenya

Switzerland

Automatic transfer of all employment agreements in case of transfer of business undertakings – mostly asset deals. Duty to inform and consult with employee representatives, if any – or, if none, with the employees.

transfer of business act kenya

Taiwan, Republic of China

There is no automatic transfer of employees in an asset sale. The new employer must inform the employees of the new terms and regulations and obtain the employees' formal consent to the offer of new employment. If an employee refuses to accept the new terms and conditions, the previous employer must make severance payments to the employee. There is also a duty to inform and consult with employee representatives (ie, unions).

In a merger and acquisition situation, 30 days' advance notice of the acquisition and the terms and conditions of employment with the new employer must be provided to the employees. Employees then have 10 days to accept or decline the offer with the new employer. The employee's failure to respond presumes consent. Past seniority must be recognized.

transfer of business act kenya

There is no automatic transfer of the employment relationship from one entity to another under the LPA. Employees are normally transferred in 2 ways:

  • The transfer of employment from the transferor to the transferee with the employee's clear written consent or with a tripartite agreement entered into between the transferor, transferee and the employee, stipulating that all rights and benefits enjoyed by the employee during their employment with the transferor will continue and the employee's length of service with the transferor will be recognized by the transferee, or
  • Full termination of the employee's employment with the transferor and signing of a new employment agreement with the transferee.

In the latter case, the transferor is liable for providing the employee with statutory severance pay and other compensation as provided under the LPA and the employee's employment contract. With the employee's employment fully terminated by the transferor, the transferee may offer the employee new employment with different terms and conditions, which may be less favorable than those offered by the transferor, and the employee's service with the transferor will not be recognized.

Change of ownership of business through shares acquisition

A mere transfer of shares in the employing entity is not considered a transfer of business or employer as the employing entity remains the same.

transfer of business act kenya

The Labor Code states that the labor contract remains in place between the worker and the employer if the legal status of the employer changes. In other cases, the transfer of an employee from one company to another would require an agreement between all three parties.

transfer of business act kenya

There are several provisions under separate laws governing transfer of employees from 1 employer to another:

  • Turkish Code of Obligations No. 6098 (TCO)
  • Turkish Commercial Code No. 6102 (TCC)

The provisions under the TCO govern transfer of employment contracts from a company to another in a broader sense, while the Labor Law specifically governs transfer of workplace and the TCC specifically governs transfer of employment contracts in corporate transactions.

The application of the above laws may differ depending on the nature of the transaction: whether the employees will be transferred through a spinoff or by way of a business transfer.

In the event of a spin-off transaction

If the employees are to be transferred to another entity within the context of a spinoff transaction to take place in Turkey, the provisions under the TCC will be applicable. According to Article 178 of the TCC, the employees will be transferred to the transferee with all rights and obligations unless the employees object to such transfer. In this regard, the TCC provides "a right of objection" to the employees.

Turkish law does not stipulate any specific requirement as to when and how a notification must be made to the employees. However, it is naturally advisable for the transferor to notify the employees in writing regarding the contemplated transfer before the spinoff is affected. Upon such notification, if the employees do not object to the transfer of their employment contracts, the transferee becomes their new employer once the spinoff transaction is effective.

If the employees are going to be transferred with exactly the same terms and conditions – that is, no special benefit will be provided to employees of different seniority or position – a template letter addressed to each employee will suffice.

If an employee objects to the transfer, their employment contract will be deemed terminated following completion of their notice period. In this event, the employee will be paid their outstanding salary and other labor entitlements (eg, annual leave entitlements, premiums or bonuses). The TCC remains silent on whether or not the employees become entitled to receive severance pay in the event of such termination. However, certain scholars opine that, in the event of such termination, the employees become entitled to receive severance pay. Importantly, as per the 3rd paragraph of Article 178, both the transferor and the transferee are jointly liable for payment of the employees' such entitlements, including severance pay.

In the event of a business transfer transaction

If the employees are to be transferred to the transferee within the context of a business transfer transaction to take place in Turkey, the provisions under the Labor Law and the TCO will be applicable.

According to the TCO, if the employment contracts will be transferred from 1 employer to another, the employees' prior written consent must be obtained. However, the TCO remains silent on what would happen if the employee were to not consent to the transfer. As modern Turkish labor law's main concern is protecting employees' benefits, it suggests permanence in employment relations. In line with this concern, contrary to what the TCC provides, Article 6 of the Labor Law states that the transfer itself does not constitute a just cause or valid reason for termination of the employment contracts on its own, and, if the employer intends to terminate the employee's contract, it must base the termination on economic or technological reasons or an organizational restructuring.

Contrary to what the TCC provides, Article 6 of the Labor Law should be taken into consideration.

transfer of business act kenya

Automatic transfer under the Employment Act and additional regulations on a transfer of business. Significant restrictions on changing terms and conditions following a transfer. Period of continuous service is preserved. Where only employees are being transferred or the employer is being changed, there is a duty to obtain the consent of employees and consult with employee representatives, if any.

If an employee transfers from one employer to another without necessarily transferring the business, in the absence of a written agreement between the new employer and the employee, terminal benefits must be paid within 2 months of the transfer. These include accrued but untaken leave and/or overtime, certificate of service and any other contractual benefits under the employee's old terms of employment.

Any termination connected to the transfer would be unfair unless for an economic, technical or organizational reason.

transfer of business act kenya

In the event of a change of a company's ownership or a company's reorganization (eg, merger or spinoff), employment continues with the company or its successor without change in terms and conditions. In case of an asset deal, however, employment must be terminated and rehired.

transfer of business act kenya

United Arab Emirates

No automatic transfer principles and no laws covering business transfers. Employees transfer through termination and rehire in an asset deal. Contracts of employment, residence visas and work permits must be addressed.

transfer of business act kenya

United Kingdom

Automatic transfer under the UK's Transfer of Undertakings (Protection of Employment) Regulations (TUPE) in a business sale or service provision change. Significant restrictions on changing terms and conditions following a transfer. Duty to inform and consult with employee representatives. Any dismissal connected to the transfer would be unfair unless for an economic, technical or organizational reason.

transfer of business act kenya

United States

None, except if it results in a plant closing or mass layoff, in which case employees are generally entitled to at least 60 days' notice, if feasible (see “Mass layoff rules” below). In an asset sale, employees may be transferred through termination and rehire.

transfer of business act kenya

When a business is acquired because of a share or stock purchase, there is no change to the identity of the employer under Venezuelan labor law. The buyer steps into the shoes of the seller and assumes all contractual and statutory rights and liabilities owed by or to its employees.

In contrast, where an asset purchase amounts to the transfer of a business (or part of a business), there is a change of employer, and the following rules apply:

  • All rights and duties of the transferor stemming from the employment contract as it exists at the date of the transfer must be transferred to the transferee.
  • The change of employer must be notified to the employee, the employees’ union and the Labor Inspector.

The old and new employer are jointly and severally liable for all employees’ vested rights at the time of the transfer, for up to 5 years from the effective transfer date. 

Employees who do not consent to the change of employer may resign with cause within 3 months from the date of the transfer and are entitled to severance payments equal to the amount they would have received in the event of dismissal without cause.

transfer of business act kenya

Upon a transfer of assets, change of ownership, division or separation, consolidation or merger, sale, lease out or conversion of the company’s form impacting the job of several employees, the previous employer must prepare a so-called labor usage plan. The previous employer and the successor employer must implement the labor usage plan. When employees’ employment contracts are terminated as a result of the transaction or conversion, the employer must pay a specific severance allowance, called a job-loss allowance, to the affected employees who have regularly worked for the employer for 12 or more months.

Kenya: Recent changes and developments to business laws and the regulatory environment

  • Link copied

Show resources

Executive summary.

The Business Laws (Amendment) (No.2) Act of 2021 (the Act) came into force on 31 March 2021. The amendments introduced by the Act are intended to support business activities in Kenya.

The key statutes amended by the Act include the Law of Contract Act, Stamp Duty Act, National Social Security Fund Act (2013), National Hospital Insurance Fund, Industrial Training Act, Companies Act (2015) and the Insolvency Act.

This Alert summarizes the key changes under these Acts.

Detailed discussion

Convenient remittance of employment statutory deductions.

The Act has aligned the remittance dates for the National Hospital Insurance Fund (NHIF) and the National Social Security Fund (NSSF) to the due date for the remittance of Pay As You Earn (PAYE). These statutory deductions are now due by the ninth day of each month.

Moreover, employers are now allowed to remit National Industrial Training Authority (NITA) payments at the end of their financial year provided the same is remitted not later than the ninth day of the month following the financial year end.

However, the Act repealed the one-month delay afforded to employers for the remittance of NSSF contributions. Employers are required to remit the contributions on the prescribed date, otherwise a 5% late payment penalty accrues.

Execution of documents by companies

The provisions of the Law of Contracts Act have now been aligned to the provisions of the Companies Act, 2015. The use of company seals is no longer mandatory in the execution of company documents.

The Companies Act, 2015 provides that documents may be executed by a company by:

  • Two authorized signatories
  • A director of a company in the presence of a witness who attests the director’s signature
  • A duly appointed attorney

Virtual and hybrid company meetings

To adopt to the new ways of doing business necessitated by the COVID-19 pandemic, the Act has now amended the Companies Act, 2015 to allow virtual and hybrid general meetings. 

A hybrid meeting in relation to a company’s general meeting is a meeting where some participants are in the same physical location while other participants join the meeting through electronic means including video conference, audio conference, web conference or such other electronic means.

A virtual meeting in relation to a company general meeting is a meeting where all members join and participate in the meeting through electronic means.

Documents exempt from stamp duty

Contracts, chargeable as conveyances on sale and that attract a fixed duty of KES100 are now exempt from stamp duty.

The Act has made the following amendments to the Insolvency Act, among others:

  • To obtain a moratorium, company directors must prepare a document setting out the terms of the proposal and a statement of the company’s financial position containing such particulars of its creditors and of its debts and other liabilities and of its assets.
  • Directors are required to establish why a moratorium is necessary to assist in agreeing to an informal restructuring or other agreement with creditors or entering a formal insolvency procedure which could lead to the rescue or efficient liquidation of the company.
  • Directors are now required to submit the financial statements to the Monitor for consideration and comment.
  • A moratorium ends after 30 days from and including the day on which it takes effect, unless the moratorium period is extended under Section 669.
  • During a voluntary arrangement, the Company is now required to appoint a Monitor, not a provisional supervisor as previously required. The Monitor has to be an insolvency practitioner who will supervise the voluntary arrangement including issuing an opinion as to whether a moratorium has a reasonable prospect of achieving its aim and if the company is likely to have sufficient funds available to it during the proposed moratorium to enable it carry on its business.

Other recent changes

Employment (amendment) act, 2021.

This Act provides that an employee who adopts a child is now entitled to one month's pre-adoptive leave with full pay from the date of the placement of the child.

The employee is required to give the employer a notice of at least 14 days of the intention of the adoption society to place the child in the custody of the employee. The notice shall be accompanied by documentation evidencing the intention of the adoption society to place the child in the custody of the employee and written authority by the adoption society allowing the employee to adopt.

Intellectual Property Bill, 2020

The Intellectual Property Bill, 2020, (the Bill) was published in 2020 with the aim of consolidating the existing intellectual property laws in Kenya. Currently, intellectual property in Kenya is regulated under the Kenya industrial Property Act, the Trademarks Act, the Copyright Act and the Anti-Counterfeit Act.

These Acts in turn establish various governing bodies namely: the Kenya Industrial Property Institute (patents, trademarks, technology innovations and utility models), the Kenya Copyright Board (copyright administration), and the Anti-Counterfeit Authority (deals with counterfeit goods and related rights). The Bill proposes the merger of all these existing governing bodies into one institution, the Intellectual Property Office of Kenya (IPOK), to be responsible for the promotion and protection of intellectual property rights. IPOK will deal with the registration, custody and enforcement of intellectual property in Kenya.

The Bill proposes that the Cabinet Secretary responsible, in consultation with stakeholders, develop a national intellectual property policy and strategy to govern the intellectual property framework in Kenya and create public awareness about economic, social and cultural benefits of intellectual property rights. 

The Bill proposes to establish an Intellectual Property Tribunal (the Tribunal) to have original and appellate jurisdiction over all intellectual property matters in Kenya.

The Data Protection Act, 2019

The Data Protection Act of 2019 was assented to by Kenya’s President on 8 November 2019 (the Act). The key highlights of this Act include:

  • Establishment of the Office of the Data Protection Commissioner – the Commissioner is mandated with the following responsibilities: overseeing the implementation and enforcement of this Act; establishing and maintaining a register of data controllers and data processors; exercising oversight on data processing operations; receiving and investigating any complaint by any person on infringements of the rights under this Act; publicizing the provisions of this Act; carrying out inspections of public and private entities with a view to evaluating the processing of personal data; and promoting international cooperation in matters relating to data protection, among others. The first Data Protection Commissioner was appointed on 12 November 2020.
  • Registration of data controllers and data processors – the Act provides that the Commissioner is granted authority to prescribe the threshold for registration of data controllers and data processors to be registered with the Office of the Commissioner.
  • Transfer of personal data outside Kenya – the Act provides that data controllers and processors can only transfer personal data to another country where they have evidenced to the Commissioner the appropriate safeguards with respect to the security and protection of the personal data.
  • Exemptions to the provisions of the Act – exemptions include where it relates to processing of personal data by an individual in the course of a purely personal or household activity; if it is necessary for national security or public interest; disclosure is required by or under written law or order of the court; it is required in the prevention or detection of crime; it is required in the assessment or collection of a tax or duty; or where publication of data would be in the public interest.

Most recently, the Data Commissioner issued various Regulations (i.e., draft Data Protection (General) Regulations, 2021,the draft Data Protection (Compliance and Enforcement) Regulations, 2021, and the draft Data Protection (Registration of Data Controllers and Data Processors) Regulations, 2021) for public consultation.

Companies Act (Beneficial Ownership Information) Regulations 2020

The Companies Act, 2015, now requires companies to maintain a register of their beneficial owners. Pursuant to this amendment, companies are now required to file with the Registrar a copy of their register of beneficial owners (in a prescribed form) within 30 days of its preparation. Any amendments to the register are to be filed with the Registrar within 14 days of making the amendments.

The Companies (Beneficial Ownership Information) Regulations, 2020 define a beneficial owner as “the natural person who ultimately owns or controls a legal person or arrangements or the natural person on whose behalf a transaction is conducted, and includes those persons who exercise ultimate effective control over a legal person or arrangement.”

The Regulations further identify a beneficial owner as a person who meets any of the following conditions:

 i. Holds at least 10% of the issued shares in the company either directly or  indirectly.

ii. Exercises at least 10% of the voting rights in the company either directly or indirectly.

iii. Holds a right, directly or indirectly, to appoint or remove a director of the company.

iv. Exercises significant influence or control, directly or indirectly, over the company.

By a notice dated 27 January 2021, the Companies Registry extended the deadline, from 31 January 2021 to 31 July 2021, for companies to prepare and file their registers of beneficial owners with the Registrar of Companies in accordance with the Regulations.

Enforcement of local ownership rule in the Information, Communication, Technology (ICT) sector

On 7 August 2020, the Cabinet Secretary, Information, Communication, Technology, Innovation and Youth Affairs gazetted the National information Communication and Technology Policy Guidelines, 2020 (the Policy).

A key legal requirement introduced by the Policy, is the requirement that at least 30% of the substantive ownership of ICT companies is to be held by Kenyans.This provision constituted a revision from the previous 20% substantive Kenyan equity ownership requirement for the issuance of telecommunication licences. All companies licensed by the Communications Authority were allowed a three-year period within which to meet the local equity requirements.

On 25 March 2021, through another gazette notice, the Cabinet Secretary published an amendment aimed at clarifying the local ownership requirements as follows:

  • An existing licensee with less than 20% local equity ownership that has not exhausted its three-year grace period will be required to meet the 30% local equity ownership at the end of its grace period.
  • An existing licensee that met the 20% local equity ownership prior to 7 August 2020 will have two years to meet the 30% local equity ownership threshold with effect from the said date.
  • An existing licensee that had a waiver granted under the ICT Sector Policy Guidelines of 2006 will have three years to meet the local equity ownership threshold with effect from the date of this Notice.
  • A new applicant for a license will have three years to meet the local equity ownership threshold from the date of issue of the license.
  • A company registered to exclusively offer Business Process Outsourcing Services will be exempt from the 30% local ownership requirement.

Competition Tribunal decision on abuse of buyer power

The Competition Tribunal in Majid Al Futtaim Hypermarkets Limited v Competition Authority of Kenya & another [2021] eKLR, issued on 20 April 2021 addressed the issue of abuse of buyer power under the Competition Act, 2010. The matter before the Tribunal was an appeal instituted by the Majid Al Futtaim Hypermarkets Limited (Majid) on the decision of the Competition Authority that required the retailer to amend various clauses of its standard supplier contract which the Authority deemed to have facilitated the abuse of power.

Majid was said to have abused its “buyer power” by: transferring commercial risks to Orchards; refusing to receive Orchards’ goods for reasons which could not be ascribed to Orchards; unilaterally terminating the commercial relationship without notice and applying rebates and listing fees marked as discounts; and requiring Orchards to deploy staff as its own cost.

Section 24(2B) of the Act stipulates that the Authority, in determining buyer power, must take into consideration the nature and determination of contract terms; the payment requested for access to infrastructure; and the price paid to suppliers. Buyer power is defined by the Act as “the influence exerted by an undertaking or group of undertakings in the position of a purchaser of a product or service to obtain from a supplier more favourable terms, or to impose a long-term opportunity cost including harm or withheld benefit which, if carried out, would significantly be disproportionate to any resulting long-term cost to the undertaking or group of undertakings.”

The Tribunal in finding that Majid abused its buyer power stated that “the influence of power of the buyer becomes evident when the buyer engages in the offending conduct” and therefore, “by engaging in conduct which amounts to abuse of buyer power, there’s buyer power.”

This case is expected to set precedence in the enforcement of “buyer power” abuse not only in Kenya but also in other African countries where the issue has not been determined judicially.

For additional information with respect to this Alert, please contact the following:

Ernst & Young (Kenya), Nairobi

  • Francis Kamau
  • Christopher Kirathe
  • Hadijah Nannyomo
  • Grace Mulinge
  • David King’ori
  • Robert Maina
  • Jessica Maina
  • Vione Nyachieo

Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris

  • Bruno Messerschmitt
  • Alexis Popov

Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London

  • Kwasi Owiredu
  • Byron Thomas

Ernst & Young LLP (United States), Pan African Tax Desk, New York

  • Brigitte Keirby-Smith
  • Dele Olagun-Samuel

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert .

Connect with us

Our locations

Legal and privacy

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

EY | Assurance | Consulting | Strategy and Transactions | Tax

EY is a global leader in assurance, consulting, strategy and transactions, and tax services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

© EYGM Limited. All Rights Reserved. 

EYG/OC/FEA no.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

EY logo

Welcome to EY.com

In addition to cookies that are strictly necessary to operate this website, we use the following types of cookies to improve your experience and our services: Functional cookies to enhance your experience (e.g. remember settings), and  Performance cookies to measure the website's performance and improve your experience . , and Marketing/Targeting cookies , which are set by third parties, allow us to execute marketing campaigns, manage our relationship with you, build a profile of your interests and provide you with content or service offerings in accordance with your preferences. 

We have detected that Do Not Track/Global Privacy Control is enabled in your browser; as a result, Marketing/Targeting cookies , which are set by third parties that allow us to execute marketing campaigns, manage our relationship with you, build a profile of your interests and provide you with content or service offerings in accordance with your preferences are automatically disabled.

You may withdraw your consent to cookies at any time once you have entered the website through a link in the privacy policy, which you can find at the bottom of each page on the website.

Review our  cookie policy  for more information.

Customize cookies

I decline optional cookies

about banner

  • You are here:  
  • Notices & Publications /

New Changes to the Kenyan Business Laws: Here’s what you need to know

The Business Laws (Amendment) (No. 2) Act, 2021 (the “New Act” ) was passed on 30 th March, 2021. Its main purpose is to facilitate the ease of doing business in Kenya by reducing the costs and time spent on various transactions.

We have set out below a detailed review of major amendments to the various laws:

Law of Contract Act (Cap 23)

The New Act has amended the meaning of the term “sign” in Section 3 to include execution of Company documents in the manner outlined in the Companies Act 2015. According to the Companies Act 2015 [1] , a company can sign documents as follows:

  • by the affixing of its common seal and witnessed by a director; or
  • by two authorised signatories or by a director of the company in the presence of a witness who attests the signature.

Therefore, all contracts by a company which have to be in writing under this Act, must be executed as stated or they will not be valid.

Industrial Training Act (Cap 237)

Payment of training levies by employers will now be remitted at the end of the financial year of a business. Businesses are therefore not required to follow the government’s financial year or the calendar year.

Further, the payment should be made by the ninth day of the month following the end of the business’ financial year.

Stamp Duty Act (Cap 480)

Contracts which are considered to be conveyances on sale under Section 49 of the Stamp Duty Act will be exempt from the fixed duty of one hundred shillings, that was previously charged under the said Section of the Act.

National Social Security Fund Act, No. 45 of 2013

Section 27 has been amended to require employers to pay contribution to NSSF on the ninth day of the month to harmonize payroll deductions through the Unified Payroll Return.

Previously, they were collected on the first day of the month.

Companies Act, No. 17 of 2015

The definition of a general meeting has been expanded and the same can now be a physical, virtual or hybrid meeting which are defined as follows:

  • Hybrid meeting - where some participants are in the same physical location while other participants join the meeting through electronic means;
  • Virtual meeting - where all members join and participate in the meeting through electronic means.

For hybrid and virtual meetings, the notice of the meeting must specify the means of joining and participating in the meeting. 

Paragraph 11 of Sixth Schedule of the Companies Act has been deleted. This section previously allowed the use of the official seal of an existing Company that had been obtained prior to the repeal of section 37 of the DDC.

Insolvency Act, No. 18 of 2015

The New Act has made the following amendments to the Insolvency Act, among others :

  • Under Section 643, on obtaining a moratorium, company directors have to prepare a document setting out the terms of the proposal and a statement of the company’s financial position containing such particulars of its creditors and of its debts and other liabilities and of its assets.
  • Directors are required to set out why a moratorium is desirable to assist in agreeing to an informal restructuring or other agreement with creditors or entering a formal insolvency procedure which could lead to the rescue or efficient liquidation of the company.
  • Additionally, Directors are now required to submit the financial statements to the Monitor for consideration and comment.
  • A moratorium ends after thirty (30) days from and including the day on which it takes effect, unless the moratorium period is extended under Section 669.
  • During a voluntary arrangement, the Company is now required to appoint a Monitor, not a provisional supervisor as previously required. The Monitor has to be an insolvency practitioner who will supervise the voluntary arrangement including giving an opinion as to whether a moratorium has a reasonable prospect of achieving its aim and if the company is likely to have sufficient funds available to it during the proposed moratorium to enable it carry on its business.

Small Claim Courts Act, No. 2 of2016

 Section 34 has been amended to provide a sixty-day (60) timeline for adjudication of small claims.  

Article by Mary Ndung’u

[1] Section 37

Pin It

  • Practical Law

Doing Business in Kenya: Overview

Practical law country q&a w-007-2231  (approx. 33 pages), dominant industries.

  • Building and construction.
  • Infrastructure development.
  • Manufacturing.
  • Transport and services.
  • Tourism (particularly from emerging markets).
  • Agriculture.
  • Wholesale and retail.

Population and Language

Business culture.

  • New Year's Day (1 January).
  • Good Friday (March or April).
  • Easter Monday (March or April).
  • Labour Day (1 May).
  • Madaraka Day (1 June).
  • Idd-ul-Fitr (date depends on the appearance of the moon).
  • Utamaduni Day (10 October).
  • Mashujaa Day (20 October).
  • Jamhuri Day (12 December).
  • Christmas (25 December).
  • Boxing Day (26 December).
  • Idd-ul-Azha (date depends on the appearance of the moon (for all persons belonging to the Islamic faith)).
  • Diwali (date depends on the appearance of the moon (for all persons belonging to the Hindu faith)).

Key Business and Economic Events

Political events, new legislation.

  • Kenya Information and Communication Act, No. 2 of 1998 (KICA).
  • Law of Contracts Act, Chapter 23.
  • Laws of Kenya, the Survey Act, Chapter 299.
  • Laws of Kenya and the Land Registration Act, No. 3 of 2012.

Legal System

  • Written laws (statutes).
  • Common law.
  • Doctrines of equity.
  • Statutes of general application in force in England on or before 12 August 1897.
  • African customary law.

Foreign Investment

Government authorisations, restrictions on foreign shareholders, restrictions on acquisition of shares, specific industries.

  • Listed companies.
  • Companies holding title to agricultural land. Approvals/exemptions from the Land Control Board are required under the Land Control Act (Chapter 302, Laws of Kenya).
  • Class 1: includes heavy earth-moving equipment and self-propelling vehicles, for example, lorries above three tonnes, forklifts, trucks. The rate is 37.5% a year.
  • Class 2: computers, photocopiers, scanners. The rate is 30% a year.
  • Class 3: includes light self-propelling vehicles and other machines such as aircraft, motorbikes and lorries under three tonnes. The rate is 25% a year.
  • Class 4: telephone sets, switch boards, bicycles. The rate is 12.5% a year.
  • 10% for the first ten years.
  • 15% for the next ten years.
  • 20% if 40% of issued share capital is listed (for a five-year period).
  • 25% if 30% of issued share capital is listed (for a five-year period).
  • 27% if 20% of issued share capital is listed (for a three-year period).

Foreign Investors

  • Certain licences appropriate to the business of the investor.
  • A certain number of specific classes of entry permits for management and technical staff and for owners, shareholders or partners and their dependants.
  • The Second Schedule to the Income Tax Act, Chapter 470 of the Laws of Kenya (ITA) provides investment allowances that are deductible from the gains or profits for a year of income where a taxpayer has incurred capital expenditure in relation to various items listed in the schedule.
  • The ITA also provides for reduced tax rates and tax exemptions for foreign and local taxable persons operating under a preferential tax regime in the Export Processing Zones or Special Economic Zones.

Business Vehicles

Main business vehicles.

  • Companies limited by shares (private or public) established under the Companies Act 2015.
  • Limited liability partnerships (LLPs) established under the Limited Liability Partnership Act 2011.

Foreign Companies

Registration and formation.

  • The intended company name.
  • The corporate structure and details of the structure, including the primary and secondary objects of the company, the issued share capital, the number and class of shares and the business start date.
  • The address and contact details.
  • Proposed shareholders.
  • Beneficial owners.
  • Proposed directors and authorised signatories.
  • Proposed company secretaries.
  • Corporate history (for example, whether the company being incorporated is a subsidiary, whether the parent company is in Kenya, or the incorporation is a result of a merger or acquisition and so on).

Reporting Requirements

  • Articles of association.
  • Details of the registered office, directors and company secretary (if applicable).
  • Accounting reference date (the last day of the month in which the anniversary of the company's incorporation occurs).
  • Annual returns.
  • Any allotment, redemption or reduction of share capital.

Share Capital

Non-cash consideration, rights attaching to shares, management structure, management restrictions, directors' and officers' liability.

  • Act within their powers.
  • Promote the success of the company.
  • Exercise independent judgement.
  • Exercise reasonable care, skill and diligence.
  • Avoid conflicts of interest.
  • Not accept benefits from third parties.

Parent Company Liability

  • Fraudulent or wrongful trading.
  • Transfers of assets at an undervalue.
  • Unlawful distributions.

Environment

  • Constitution of Kenya, 2010.
  • Environmental Management and Co-ordination Act (Cap 387, Laws of Kenya) (EMCA).
  • Forest Conservation and Management Act No. 34 of 2016.
  • Wildlife Conservation and Management Act No. 47 of 2013.
  • United Nations Convention on Biological Diversity.
  • United Nations Framework Convention on Climate Change.
  • United Nations Convention on Combating Desertification.
  • Stockholm Convention on Persistent Organic Pollutants.
  • Environmental Impact Assessments (EIAs) must be conducted with respect to activities or projects to determine whether or not they will have any adverse effect on the environment.

Laws, Contracts and Permits

Foreign employees, employees working abroad, mandatory rules of law.

  • Employment Act 2007. This provides the basic conditions of employment. However, employers may provide better terms in the employment contract, collective bargaining agreement, employment manual, policy or practice.
  • Labour Institutions Act 2007. This establishes wage councils, provides for their functions, powers and duties and for other relevant matters.
  • Labour Relations Act 2007. This regulates unions and trade disputes.
  • Occupational Safety and Health Act 2007. This regulates workplace health and safety.
  • Work Injury Benefits Act 2007. This provides compensation for work-related injuries.
  • Kenya Citizenship and Immigration Act 2011. This regulates the issue of work permits to foreign employees.
  • Employment and Labour Relations Court Act 2011. This sets up an industrial court to hear employment disputes.
  • The National Social Security Fund Act 2013 . This requires every employer to register with the state pension fund known as the National Social Security Fund and to register its employees as members of the pension fund.
  • The National Hospital Insurance Fund Act 1998. This establishes the state hospital insurance fund known as the National Hospital Insurance Fund (NHIF), and provides for rules relating to payments to the NHIF by employers and employees and benefits to contributors. The funds are used to assist employees settle in-patient medical bills.
  • The Industrial Training Act 1960. This regulates the training of apprentices and indentured learners. It requires an employer to pay a training levy of KES50 to the Industrial Training Levy Fund for each of its employees every month.
  • The Constitution of Kenya. Fair labour practices are recognised as a constitutional right.
  • Name, age, permanent address and gender of the employee.
  • Details of the employer.
  • Job description.
  • Date of commencement.
  • Form and duration of employment.
  • Place and hours of work.
  • Remuneration and the method of remuneration.
  • Entitlement to annual leave, public holidays, sick leave and a pension scheme.
  • The length of notice for termination.

Implied Terms

Collective agreements, work permits, residency permits, termination.

  • On summary dismissal.
  • Redundancy.

Fair Dismissal

  • Summary dismissal takes place when an employer terminates the employment of an employee without notice or with less notice than the employee is entitled to under statute or contract. Employers can dismiss employees summarily where they have fundamentally breached their obligations by their conduct. Gross misconduct will arise in matters including:
  • Wilful neglect to perform any work within a person's duty.
  • Careless and improper performance of duties.
  • Committing or suspected of committing a criminal offence against or to the substantial detriment of their employer.

Unfair Dismissal

  • Damages not exceeding 12 months of the gross wage.
  • Reinstatement.

Class of Individuals

  • Daily, the notice period is the close of any day without notice.
  • At intervals of less than a month, the notice period is the end of the next period following the written notice.
  • At intervals of or exceeding one month, the notice period is 28 days.

Redundancies and Mass Termination

Procedural requirements.

  • Notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy at least a month before the intended date of termination.
  • Notifies the employee of the intended redundancy personally in writing (if the employee is not a union member) and the labour officer at least a month before the intended date of termination.
  • Pays in cash any leave due to the employee who is made redundant.
  • Pays at least one month's notice or one month's wages in lieu of notice (if the employer does not require the employee to serve the notice period).
  • Pays an employee severance pay at the rate of at least 15 days' pay for each completed year of service.
  • The employer must have due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy.
  • If there is a collective agreement between an employer and a trade union setting out terminal benefits payable on redundancy, the employer must not place the employee at a disadvantage for being or not being a member of the trade union.

Taxes on Employment

Tax residence.

  • Have a permanent home in Kenya and were present in Kenya for any period in a particular income year.
  • were present in Kenya for a period or periods of 183 days (in aggregate) or more in that year of income; or
  • were present in Kenya in that year of income and in each of the two preceding years of income for periods averaging more than 122 days in each income year.

Other Methods to Determine Residency

Tax resident employees, non-tax resident employees, tax resident business.

  • It is incorporated (or registered) under Kenyan law.
  • The management and control of its affairs are exercised in Kenya.
  • The cabinet secretary in charge of the National Treasury declares the company to be tax resident in Kenya.

Non-Tax Resident Business

  • At a rate of 1% of the certified market value on the transfer of shares.
  • At a rate of 4% of the transfer of land in towns and 2% on land in rural areas.

Dividends, Interest and IP Royalties

  • Dividends paid to foreign corporate shareholders?
  • Dividends received from foreign companies?
  • Interest paid to foreign corporate shareholders?
  • Intellectual property (IP) royalties paid to foreign corporate shareholders?

Dividends Paid

Dividends received, interest paid, ip royalties paid, groups, affiliates and related parties, customs duties.

  • 0% on raw materials, certain capital goods, some agricultural inputs, certain medicines and certain medical equipment.
  • 10% on intermediate goods and other essential industrial inputs such as animal fats and oils that have not been chemically modified and sugars.
  • 25% on finished goods.
  • Import Declaration Fee on all goods imported into Kenya for home use at 3.5% of the customs value of the goods.
  • Railway Development Levy on all goods imported into Kenya for home use at the rate of 2% of the customs value of the goods.
  • Import VAT at 16%.

Double Tax Treaties

Competition, competition authority.

  • Its domestic regime (the Competition Act 2010 enforced by the Competition Authority).
  • The Common Market for Eastern and Southern Africa (COMESA) Competition Regulations.
  • The East African Community Competition Act 2006 (not yet operational).

Restrictive Agreements and Practices

  • Directly or indirectly fixes purchase or selling prices or any other trading conditions.
  • Limits or controls production, market outlets or access, technical development or investment.
  • Otherwise prevents, distorts or restricts competition.
  • When determining whether an agreement or arrangement constitutes a restrictive trade practice, no single methodology will be applied in all cases. The CA will undertake a fact-finding process in each case and apply a range of tools to evaluate the conduct and/or agreement in question.
  • Agreements between competitors at the same level of production and agreements among market players at different levels of production (horizontal and vertical agreements) are prohibited to the extent that they distort or restrict competition.
  • Market division might involve competitors agreeing to allocate customers between them or agreeing to stay out of each other's geographic territory or customer base.
  • total or partial exclusion of rivals from markets;
  • complete lack of competition in the market; or
  • supra-normal profits owing to no competition and no price competition.
  • A citizen of Kenya or a person ordinarily resident in Kenya.
  • A body corporate incorporated in Kenya or carrying on business within Kenya.
  • Any person in relation to the supply or acquisition of goods or services by that person into or within Kenya.
  • Any person in relation to the acquisition of shares or other assets outside Kenya resulting in the change of control of a business, part of a business or an asset of a business, in Kenya.

Unilateral Conduct

Transactions subject to merger control.

  • Beneficially own more than one half of the issued share capital of the undertaking.
  • Are entitled to vote a majority of the votes that may be cast at a general meeting of the undertaking, or have the ability to control the voting of a majority of those votes, either directly or through a controlled entity of that undertaking.
  • Can appoint, or veto the appointment of, a majority of the directors of the undertaking.
  • Are a holding company, and the undertaking is a subsidiary of that company.
  • (Where the undertaking is a trust) can control the majority of the votes of the trustees or appoint the majority of the trustees or appoint or change the majority of the beneficiaries of the trust.
  • (Where the undertaking is a nominee undertaking) own the majority of the members' interest or control directly or has the right to control the majority of members' votes in the nominee undertaking.
  • Can materially influence the policy of the undertaking in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in the points above.
  • Combined KES0 to KES500 million: A merger notification is not required (that is, there is a block exemption) if the higher of the combined annual turnover or value of assets of the acquirer and the target is less than KES500 million.
  • Combined KES500 million to KES1 billion (where target is above KES500 million): An exclusion application is required where the higher of the combined annual turnover or value of assets of the acquirer and target is more than KES500 million but less than KES1 billion.
  • Combined over KES1 billion to KES10 billion (where target is above KES500 million): There is a mandatory requirement to make a notification where the higher of the combined annual turnover or value of assets of the acquirer and the target is above KES1 billion and the higher of the target's annual turnover or value of assets is above KES500 million.
  • Combined over KES10 billion to KES50 billion (where target is above KES500 million): There is a mandatory requirement to make a notification where the higher of the combined annual turnover or value of assets of the acquirer and the target is above KES1 billion and the higher of the target's annual turnover or value of assets is above KES500 million.
  • Combined over KES50 billion (where target is above KES500 million). There is a mandatory requirement to make a notification where the higher of the combined annual turnover or value of assets of the acquirer and the target is above KES1 billion and the higher of the target's annual turnover or value of assets is above KES500 million.

Foreign-to-Foreign Acquisitions

Anti-bribery and corruption, intellectual property.

  • National filings at the Kenya Industrial Property Institute (KIPI).
  • Regional filings at the African Regional Intellectual Property Organisation (ARIPO).
  • International filings under the Patent Co-operation Treaty.

Trade Marks

  • A company/individual/firm name represented in a special manner.
  • An applicant's/business predecessor's signature.
  • An invented word or words.
  • Words with no reference to the character/quality of the goods and that do not contain a geographical name/surname.
  • Any distinctive mark.
  • Opposition.
  • Cancellation.
  • Infringement.
  • Passing-off.
  • Injunctions.
  • An account of profits.
  • Orders for delivery up and/or destruction of the offending goods.

Registered Designs

Unregistered designs.

  • Literary works.
  • Musical works.
  • Artistic works.
  • Audio-visual works.
  • Sound recordings.
  • Literary, musical or artistic work other than photographs are protected for 50 years after the end of the year of the author's death.
  • Audio-visual works and photographs are protected for 50 years from the end of the year in which the work was made, first made available to the public or first published (whichever is the latest).
  • Sound recordings are protected for 50 years after the end of the year of the recording.
  • Broadcasts are protected for 50 years after the end of the year of first broadcast.

Marketing Agreements

Distribution, franchising, advertising, digital advertising.

  • Consumer Protection Act 2012.
  • Competition Act 2010.
  • Kenya Information and Communications (Consumer Protection) Regulations 2010.
  • Food, Drugs and Chemical Substances Act 1965.
  • Alcoholic Drinks Control Act 2010.
  • Tobacco Control Regulations 2014.

Direct Marketing

Data protection, data protection laws.

  • Data Protection (General) Regulations 2021.
  • Data Protection (Registration of Data Controllers and Data Processors) Regulations 2021.
  • Data Protection (Complaints Handling Procedure and Enforcement) Regulations 2021.
  • The transfer of personal data.
  • How data subjects' rights should be provided for.
  • What the thresholds and requirements are for the registration of data controllers and data processors.
  • How complaints relating to infringements and contraventions of the DPA will be handled.
  • How enforcement procedures will be undertaken.
  • Kenya Information and Communications Act 1998.
  • Access to Information Act 2016.
  • Health Act 2017.
  • Health Records and Information Managers Act 2016.
  • Banking (Credit Reference Bureau) Regulations 2020.

Consumer Privacy Laws

Product liability.

  • The Constitution of Kenya.
  • Sale of Goods Act 1931.
  • Standards Act 1974.
  • Pharmacy and Poisons Act 1957.
  • Fertilisers and Animal Foodstuffs Act 1967.

Regulatory Authorities

Financial services, other considerations, contributor profiles, wangui kaniaru, partner, anjarwalla & khanna.

  • Shanta Gold, a gold mining company listed on the London Stock Exchange and an East Africa-focused gold producer, developer and explorer, in connection with acquisition of the entire issued share capital of Acacia Kenya Exploration (Kenya), a company with mining operations in the western region of Kenya and the Kenyan subsidiary of Barrick Gold Corporation, one of the world's leading gold mining businesses with mining operations and projects in 15 countries.
  • Huaxin Cement Company, one of the world's leading companies in the building materials industry, in connection with its acquisition of 100% of the issued shares in Maweni Limestone, a Tanzanian company involved in the business of making clinker and manufacturing and distributing cement.
  • CDC Group, a development finance institution owned by the UK government, on its USD 140 million equity investment for 40.65% of the issued share capital in ARM Cement, East Africa's second biggest cement producer with operations in Kenya, Tanzania and South Africa and listed on the Nairobi Securities Exchange, including assisting with all legal matters in connection with the deal.
  • Schneider Electric Industries, a leading publicly listed French multinational, on its proposed acquisition of a majority stake in a Kenyan company and two affiliates as well as subsidiaries in Uganda and Tanzania, and proposed joint venture between the acquirer and the vendors. The scope of worked included conducting due diligence, drafting and negotiating all transaction documentation, fulfilling COMESA competition filing.

Edwina Warambo, Senior Associate

  • CDC Group in connection with its USD 140 million equity investment for 40.65% of the issued share capital in ARM Cement.
  • Post Holdings in connection with the purchase of 100% of the shares in Latimer Newco 2, the holding company of the Weetabix Group, which includes Weetabix, a food company incorporated in the UK, and Weetabix East Africa.
  • Garda World in connection with their acquisition of the entire issued share capital of Ursa Group.
  • iColo.io in connection with the proposed investment by Interxion Participation 1 B.V (Interxion) of USD 2 million for the establishment of a data center in Mombasa.
  • Blockbonds AS in connection with regulatory requirements and establishment of a subsidiary in Kenya.
  • Languages. English, Swahili and Basic French

George Gitau, Principal Associate

  • A company undertaking a road construction project under the Kenya Road Annuity Programme Public Private Partnership in connection with the provision of tax advisory services.
  • One of the Africa focused private equity firms in connection with the disposal of its interests in a leading chain of restaurants with operations in Kenya and Uganda.
  • One of the leading global private equity firms in connection with its investment in a regional dairy processing company with operations in Uganda and Kenya.
  • An American investment bank in connection with its investment in a Kenyan agribusiness company.

Doreen M. Kiogora, Associate

  • Vivo Energy Investments, a subsidiary of Vivo Energy Holdings in connection with the proposed acquisition of shares in Kuku Foods Kenya Limited, Kuku Foods Rwanda Limited, and Kuku Foods Uganda, including assisting in competition notifications to the Competition Authority of Kenya and the COMESA Competition Commission.
  • Telkom Kenya, a mobile telephony company in Kenya partly owned by the Government of Kenya and Helios Investment Partners, a private equity firm operating in Africa and based in London, in connection with its proposed merger with Airtel Kenya.
  • Go Communications, an information communications sector company which owns eight radio broadcasting frequencies and transmission equipment in Kenya, in connection with the proposed acquisition of 100% of the issued share capital of Go Communications Limited by Energy Media Holdings.
  • i-Hub, an innovation hub located in Nairobi, in connection with the competition notification to the Competition Authority of Kenya in relation to the proposed acquisition of the entire issued share capital of i-Hub by Co-Creation Hub.
  • International Finance Corporation, an international financial institution offering investment, advisory and asset-management services to encourage private-sector development in less developed countries, in connection with providing competition advice with respect to the Fair Competition Commission of Tanzania.

Sarah W. Njuguna, Associate

  • Catalyst Principal Partners, a leading private equity firm incorporated in Mauritius, in relation to their investments in companies across Africa, including conducting due diligences and preparing various transaction documents.
  • One of the world's largest internet service providers on the available structuring options for purposes of meeting the local shareholding requirements in relation to setting up operations in Kenya.
  • An American non-profit global health organization in relation to setting up in Kenya, Uganda, Tanzania and Ethiopia, including advising on tax structuring and tax implications.
  • Hogan Lovells Johannesburg, in connection with providing advice to a Japanese client on the regulatory framework on synthetic fibres and antibacterial agents in Kenya.
  • An English entity that operates a global payment services business on the regulatory overview of proposed gateway services in Kenya.
  • Baker & Mckenzie, in relation to advising one of their clients on the regulatory requirements in relation to product recalls in Kenya.
  • Languages. English, Swahili

Jade Makory, Associate

  • A company on increase in share capital, allotment and conversion documentation. This also entailed reviewing Competition Authority of Kenya exemption application documents and preparing the stamp duty exemption documents.
  • A private client on the negotiation of a share purchase agreement for the disposal of their interests in a company and additionally assisting them with varying existing agreements.
  • Advising an International Law Firm on the tax implications of setting up an employee share incentive scheme situated in South Africa for employees based in Kenya.
  • A bank planning to enter into a third-party service provider agreement which would result in the sharing of personal data on the data protection considerations of sharing customer data under the European Union's General Data Protection Regulation (GDPR) as well as Kenyan data protection law.
  • A multinational player in the agri-business industry on the data protection implications under the European Union's General Data Protection Regulation (GDPR) as well as Kenyan and Tanzanian data protection law in relation to the collection of personal data for its COVID 19 related aid program for farmers in Africa.
  • Immigration
  • Cross-border - IP&IT
  • Cross-border - Company Law and Corporate Governance

This resource is periodically updated for necessary changes due to legal, market, or practice developments. Significant developments affecting this resource will be described below.

preloder

Business Laws (Amendment) Act, 2020 on ease of registration of Transfers and leases in Kenya

transfer of business act kenya

Legal Alert: Impact of the Business Laws (Amendment) Act, 2020 on ease of registration of Transfers and leases in Kenya

On 20 th March 2020, the long-awaited Business Laws (Amendment) Bill 2020 ( The Act ) became law. The key objective of the Act is to enhance the ease of doing business in Kenya in a bid to boost the country’s ranking in the World Bank Ease of Doing Business index.

As highlights, the Act effects changes in registration of conveyancing instruments as follows:

  • E – stamping of documents

Stamp duty is a monetary rate charged on instruments as specified the schedule of the stamp Duty Act Cap 480 Laws of Kenya. Once stamp duty is paid to the Collector being Kenya Revenue Authority (KRA), the instrument is embossed or impressed by means of a dye or franking machine or an adhesive stamp.

Conveying instruments must be stamped within Thirty (30) days from the date of execution; otherwise interest for late payment will arise.

The Act has amended the Stamp Duty Act by introducing electronic stamping of instruments ( e – stamping ). The migration to the digital platform of e- stamping by the , the collector will take effect when the Cabinet Secretary for National Treasury formulates and enacts regulations with respect to e- stamping

  • Land Rates and Rent clearance certificates together with consents have been abolished in registration

Prior to the enactment of the Business Law (Amendment) Act, it was a mandatory obligation in conveyancing for land rates to be paid for property within county and urban areas, municipalities and township areas in accordance with the Rating Act Cap 266 laws of Kenya. Land Rent was to be paid to either the National or county governments as the lessors for leasehold properties.

The Act, in a bid to ease registration of instruments transferring. Leasing and/ or Charging property, has abolished the statutory requirement under section 38 and 39 of the Land Registration Act No. 3 of 2015 (LRA) for submission of clearance certificates with respect to Land rates and rent. In addition, the Act has abolished the provision to submit consents in the disposition of Land

Indeed, this amendment to the LRA provisions on clearance certificates and consents will reduce the time, cost and expenses incurred in obtaining the said documents.  However, to protect would be Purchasers from inheriting the burden of unpaid land rates and rent arrears it shall be prudent for the Purchaser and appointed advocate to ensure that the sale agreement has a conditional clause on payment of land rates and rent prior to payment of the balance of the Purchase Price.

  • Codification of electronic signatures (e- signatures)

The Act has codified electronic signatures on documents and further expanded the scope of execution of documents by validating the use of e- signatures in various statutes including the LRA. This is in tandem with the Ministry of Lands and Physical Planning push for digital revolution for conveyancing and registration to improve efficiencies.

E signatures in conveying instruments will be valid so long as the Parties consent to it. The Act adopts a pragmatic approach and does not prescribe any form or type of signature.

The foreseeable difficulty of e – signatures in real estate is first the legal requirement of physical witnessing and attestation of signatures under section 3 of the Law of Contract Cap 23 Laws of Kenya. Secondly, the uptake of e – signatures on cross – border transactions.  As such we opine there is a need for practical legislative reform with respective to witnessing and attestation in the digital platform. For instance, is it sufficient to have video witnessing?

Despite the said quagmire of attestation and witnessing of e – signatures, with respect to registration of instruments electronically executed, the Registrar has been conferred the discretionary power to dispense with verification of the e-signature

This Alert is issued for informational purposes only and is not intended to be construed or used as general legal advice nor as a solicitation of any type. Should you need any assistance or want any queries answered on the issues discussed in this alert, please get in touch through e-mail: [email protected]

transfer of business act kenya

NOTICE OF THE THREE (3) WEEKS CLOSURE OF THE NAIROBI AND CENTRAL REGISTRIES AT ARDHI HOUSE FOR AUDITING OF RECORDS

Post a comment, quick links, our location.

Nairobi – Victoria Towers, 1st Floor Kilimanjaro Road, Upperhill | P.O. Box 26993 – 00100 NAIROBI

Nyahururu Branch-Ribs Village Building Koinange Road, 1st Floor | P.O. Box 266 – 20300 NYAHURURU

Our Contacts

Tel: +254 777 290 931/ +254 741 967 775

Mobile:   0700 290 390 

Email: [email protected]

All Rights Reserved | Muchemi & Co Advocates 2018

Transfer of business: Out with the old and in with the new, does not necessarily mean the business has transferred to you

  • All Employment Law News

Employment Law

In Imvula Quality Protection and Others v University of South Africa (J435/17) [2017] ZALCJHB 310 (31 August 2017), the Labour Court had to determine whether the termination of the contracts with two service providers and the decision to employ a majority of their employees triggered s197 of the Labour Relations Act, No 66 of 1995.

In this case, UNISA contracted with Imvula Quality Protection (Imvula) and Red Alert TSS (Pty) Ltd (Red Alert) (collectively referred to as the ‘two service providers’) to provide it with security services. In terms of the contracts, in exchange for the two service providers providing their own uniforms and equipment, placing security officers at UNISA campuses in Gauteng and managing the security services UNISA would pay them a monthly fee. 

UNISA, in accordance with the contracts, terminated the contracts with the two service providers. This occurred after it was faced with a demand to insource previously outsourced functions. Following the demand, UNISA agreed to partially insource the security function. UNISA offered employment to the majority, but not all, of the security staff employed by the two service providers on the contract. 

UNISA contemplated a ‘shared services’ business model in terms of which the security services staff would be employed by UNISA but the security services would be provided by a new outsourced service provider using the UNISA staff. The new service provider would be required to provide its own equipment and infrastructure particularly torches, guard tracking, uniforms and vehicles to UNISA. It was to also provide managers and supervisors that it employed to manage the security service. UNISA would only manage the human resources. 

The two service providers approached the Labour Court for an order declaring that all their employees working on the UNISA contracts be declared UNISA employees. They argued that s197 of the LRA was applicable to the termination of the contracts and UNISA’s subsequent offers of employment to their staff. They argued that providing security guards is a service, therefore, a business and the insourcing of the service resulted in the service’s continuation. UNISA argued that s197 did not apply and that there was no transfer of a business as a going concern despite its offers of employment to the staff.

If s197 is triggered a number of consequences follow by operation of law. For instance, the “new employer is automatically substituted in the place of the old employer in respect of all contracts of employment in existence immediately before the date of transfer” and “all the rights and obligations between the old employer and an employee at the time of the transfer continue in force as if they had been rights and obligations between the new employer and the employee”. If the two service providers succeeded with their argument that s197 applied, all of their employees on the UNISA contracts, and not only those selected by UNISA, would become UNISA employees. 

The Labour Court recognised the dual purpose of s197 and that on the one hand it is aimed at protecting employees against job losses while on the other hand it facilitates the sale of business as a going concern. The Labour Court held that although s197 is aimed at avoiding job losses, job losses do not necessarily trigger s197. 

It held that the section will be triggered when the following three requirements are simultaneously met : 

  • A transfer - a ‘transfer’ is defined in s197(1) to mean “the transfer of a business by one employer (‘the old employer’) to another employer (‘the new employer’) as a going concern.
  • A transfer of a business - a ‘business’ includes a service, and importantly, the Labour Court held that it is the business supplying the service that is capable of being transferred not the service itself.
  • The business is transferred as a going concern -  whether there is a transfer as a going concern, the court held, is determined by a number of factors including whether the new employer takes over workers, whether assets (tangible and intangible) are transferred and whether the new employer carries on the same business. 

Dealing with the issue of changing service providers, the Labour Court held that “the termination of a service contract or the appointment of a new service provider does not in itself trigger the application of s197”. 

It referred to two situations “within the realm of outsourcing and insourcing” identified by the Constitutional Court. In one situation s197 applies whereas in another it does not. The distinction between the situations arises due to the definition of the term ‘business’ in s197. As already indicated, the term business includes a service, however, the Labour Court held that although the definition of ‘business’ does include a service, it is the business supplying the service that is capable of being transferred, not the service itself.

In the first situation identified by the Constitutional Court, the right to provide the services is forfeited by the outgoing service provider but its business is not transferred. The court held that “in this instance, the right to provide the outsourced service may transfer, but no business is transferred as a going concern.” In this situation, s197 is not applicable. In the second situation s197 applies, as in that situation when the service contract is terminated (either because the service is insourced or because there is a change in service providers) the business (and its infrastructure) supplying the service is transferred from the outgoing service provider back to the client or to the new service provider as a going concern. The Labour Court held that the two service providers had failed to show that the termination of the contract fell within the second situation. It importantly held that the two service providers had not established that there was a transfer of a business, the second requirement already discussed above. It held that “[a]though it is not impossible for a transfer only of employees to constitute the transfer of a business for the purposes of s197, the requirement of the existence of a business must be met.” 

In this case, no assets and no infrastructure were transferred from the two service providers to UNISA. Other than the employees working on UNISA contracts, the two service providers retained all remaining components making up their own businesses and could offer security services to other clients. 

The Court did not follow the Labour Appeal Court (LAC) decision in Rand Airport where the employer outsourced its gardening and security services and the LAC held the transaction to constitute the transfer of a service in terms of s197. The Labour Court distinguished the LAC decision on the basis that the Constitutional Court has developed the law to hold that it is the business rendering the service that must transfer for s197 to apply.  

Section 197 was not applicable in this case and the Court dismissed the application with costs. 

The information and material published on this website is provided for general purposes only and does not constitute legal advice. We make every effort to ensure that the content is updated regularly and to offer the most current and accurate information. Please consult one of our lawyers on any specific legal problem or matter. We accept no responsibility for any loss or damage, whether direct or consequential, which may arise from reliance on the information contained in these pages. Please refer to our full terms and conditions . Copyright © 2024 Cliffe Dekker Hofmeyr. All rights reserved. For permission to reproduce an article or publication, please contact us [email protected] .

We support our clients’ strategic and operational needs by offering innovative, integrated and high quality thought leadership. To stay up to date on the latest legal developments that may potentially impact your business, subscribe to our alerts, seminar and webinar invitations.

You might also be interested in

transfer of business act kenya

by Belinda Scriba and Katekani Mashamba

Trusts and suretyship: Is consent from a majority of trustees enough for a trust to conclude an agreement?

In the decision of Shepstone & Wylie Attorneys v Abraham Johannes de Witt N O and Others (1270/2021) ZASCA, the Supreme Court of Appeal (SCA) had to determine whether the court a quo was correct in finding that a resolution taken by the majority of a trust’s trustees was sufficient to authorise the conclusion of a deed of suretyship in favour of a thirdparty. 

Dispute Resolution

transfer of business act kenya

by Simone Immelman

Have you been released from your personal suretyship or guarantee?

When applying for commercial property mortgage finance, the financial institution may also require additional security in the form of a personal suretyship or guarantee for the obligations of the main debtor.

Real Estate Law

transfer of business act kenya

14 Jun 2023

by Sasha Schermers and Howmera Parak

The High Court “waives” goodbye to an application for a waiver of minimum distribution requirements for public benefit organisations

In the recent case of Tomson N.O and Others v Commissioner for the South African Revenue Service and Another (33918/2021) ZAGPPHC 359 (24 April 2023) the Pretoria High Court heard a review application brought by the appointed trustees of the Chevrah Kadisha Capital Trust (trust).

Tax & Exchange Control

transfer of business act kenya

14 Nov 2023

by Eugene Bester and Loyiso Bavuma

How special is special when determining special leave to appeal?

In Mosselbaai Boeredienste (Pty) Ltd v OKB Motors CC ZASCA 91, taken on appeal from the Free State Division of the High Court, Bloemfontein, the Supreme Court of Appeal (SCA) considered the legal principles regarding special leave to appeal.

transfer of business act kenya

24 Apr 2023

by Imraan Mahomed, Biron Madisa and Onele Bikitsha

How to bring an incarcerated employee to an internal disciplinary hearing

Employers often face the practical difficulty of how an employee who has been incarcerated, typically awaiting trial (which on its own can take years), is to be brought to an internal disciplinary hearing.

transfer of business act kenya

by Louis Botha

A matter of review and the High Court’s jurisdiction in tax disputes: Will the ConCourt have the final say?

In our Tax and Exchange Control Alert of 20 April 2023, we discussed the approach followed by the Supreme Court of Appeal (SCA) regarding the High Court’s jurisdiction to review the South African Revenue Service’s (SARS) decisions made in respect of assessments.

This website uses cookies to enhance the browsing experience. For more information, please see our Cookie Policy.

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

Copyright © 2024, Ernst & Young LLP.

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

Privacy   |  Cookies   |  BCR   |  Legal   |  Global Code of Conduct Opt out of all email from EY Global Limited.

Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here . By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice . Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.

Yes, I accept         Find out more

Select a location

  • Africa-wide
  • Angola (English) (Português)
  • Mozambique (English) (Português)
  • Senegal (English) (Français)
  • South Africa

This selection will switch the site from presenting information primarily about Kenya to information primarily about . If you would like to switch back, you may use location selection options at the top of the page.

  • Consumer Goods and Retail
  • Energy and Natural Resources
  • Financial Services
  • Industrials
  • Infrastructure, Construction and Transport
  • Life Sciences
  • Media, Sport and Entertainment
  • Real Estate
  • Finance and Projects
  • Intellectual Property and Technology
  • Litigation, Arbitration and Regulatory
  • Restructuring

Browse our latest publications, alerts, insights and press releases.

  • Publications and news
  • Publication series

Charging VAT on the transfer of a business bad for trade, investment

Changes in business ownership will usually take one of two forms; one could sell the shares in a company together with its underlying assets and liabilities or simply sell the underlying assets and liabilities of the company. There are many commercial and legal reasons that inform why a potential investor would opt to purchase the shares of a company instead of the underlying the assets and liabilities of the company or vice-versa. One of the reasons could be the tax impact each option would have.

The transfer of shares is exempt from VAT whereas the transfer of the underlying assets and liabilities of a company is, subject to VAT at the standard rate of 16%. When one considers VAT alone, the acquisition of shares is significantly lower than the latter option.

In previous iterations of the VAT Act, the transfer of the underlying assets and liabilities (net assets) of a company that constitute the whole or an independent part of a business such that the person receiving the assets can continue with the business was referred to as a Transfer of Business as a Going Concern (“ TOGC ”).

The VAT status of a TOGC in Kenya has in recent years changed significantly:

  • Prior to 1st July 2018, a TOGC was classified as a zero-rated supply. During this period no VAT was added to the TOGC value and the seller could recover any VAT credits it was carrying;
  • From 1 st July 2018 to 25 th April 2020, the VAT status of a TOGC was changed from zero rated to exempt. VAT was also not included in the TOGC value but in this instance the seller lost the opportunity to recover some if not all of the VAT credits it was carrying;
  • By an amendment to the VAT Act, 2013 by the Tax Laws Amendment Act (2020), effective 25 th April 2020, all reference to a TOGC was deleted from the VAT Act which meant that such transfers became subject to VAT at 16%. VAT must now be added to the TOGC value and the VAT remitted to the Kenya Revenue Authority.

Subjecting VAT to a TOGC transaction may have a temporary cashflow implication or a real cost implication. At the time of acquiring the business, the buyer must not only fund the agreed price but the VAT cost as well which at 16% represents a significant portion of the purchase price. It could be argued that the buyer can claim the VAT incurred from the taxable supplies it makes but the reality is that the buyer can only recover a small portion of the VAT monthly depending on how the business is performing. The recovery of the VAT could therefore take years meaning that cash will be tied up in the VAT credit in the purchaser’s books. The VAT may eventually be recovered in full but if recovered at a slow rate, it will invariably hamper the buyer’s operations.

There could also be real cost implications where the net assets being transferred are for use in a business that is exempt from VAT such as a school or a hospital. In such a case the purchaser will not be able to claim the VAT on the transaction. This means that the VAT paid to KRA is a cost to the purchaser, which cannot be recovered and could discourage a prospective buyer.

Parliament seems to misunderstand the issue and in response to several submissions to the parliamentary finance committee seeking to exempt or zero rate such transactions, the Finance Committee has often responded saying that the purchaser should be able to re-claim the VAT paid and therefore there is no need to exempt such transactions from VAT. This position does not however consider the cash-flow impact of charging VAT on TOGC transactions to commerce.

Jurisdictions such as the United Kingdom, India, South Africa recognise these challenges and treat transfers of businesses as a going concern are exempted from VAT. Prior to the most recent amendment, Kenya had also adopted a similar practice. The VAT status of transfers of business as going concern should be reviewed to facilitate such transactions, foster commerce and to align with the global position on VAT on transfers of businesses.

The article was featured in the Business Daily and can be accessed here . 

Caleb Langat

We've detected unusual activity from your computer network

To continue, please click the box below to let us know you're not a robot.

Why did this happen?

Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy .

For inquiries related to this message please contact our support team and provide the reference ID below.

Fraud like nobody's watching: Trump was probed for 5 years and still wouldn't clean up his act

  • Trump's fraud-trial verdict targets his cash, NY business address, and Trump Organization control.
  • The verdict notes that Trump continued to commit fraud even while under investigation.
  • Trump's court-appointed monitor will return any fuzzy math to Trump for corrections.

Insider Today

Donald Trump's fraud verdict targets three things he values dearly: his cash, his New York business address, and the Trump Organization steering wheel.

It'll take many months of appeals to get there. But if Friday's verdict is upheld, Trump must relinquish $355 million in ill-gotten gains, plus yet-tallied interest that could approach $100 million.

He'll be barred for three years from running a New York business, borrowing from a New York-registered bank, and buying commercial property anywhere in the state.

And a now-strengthened court-appointed monitor who, so far, no appeal effort has managed to dislodge, will continue to oversee Trump's finances.

These penalties — his punishment for a decade of fraud-filled financial statements he sent to banks and insurers — did not sneak up on the GOP frontrunner.

For the past five years, Trump has known he was going to be first probed, then sued, then put on trial for his financial frauds.

He's known he's been watched since March 2019, when New York Attorney General Letitia James sent her first blizzard of subpoenas snowing down on his banks, accountants, and assessors.

Yet Trump has spent these five years frauding like nobody's watching.

He d odged his subpoenas . He continued inflating his worth in financial statements by as much as $3.6 billion a year .

And even while a court-installed independent monitor watched these past 14 months, he still hid a transfer of $40 million, state Supreme Court Justice Arthur Engoron noted in Friday's verdict.

The verdict ratchets back many penalties James sought. Trump's properties won't be plac ed under receivership and sold , and he'll lose his Trump Organization steering wheel for three years rather than permanently.

But Trump's persisting penchant for fraud, even under an investigatory microscope for five years — means he'll be watched far more closely now.

Trump's monitor, the retired federal judge Barbara Jones — still in place despite his prior appeals — has for 14 months reviewed all of his company's financial disclosures to third parties after they were sent out.

Now, as the verdict orders, "the Trump Organization shall be required to obtain prior approval — not, as things are now, subsequent review — from Judge Jones before submitting any financial disclosure to a third party, so that such disclosure may be reviewed beforehand for material misrepresentations."

That means for at least the next three years, Jones will be checking the Trump Organization's math in advance.

This includes every financial disclosure to a bank, insurer, or potential buyer of his properties. That's the paperwork for his many branding deals, licensing deals, and corporate tax returns.

Jones will send any fuzzy math back for corrections. Meanwhile, Trump must continue, under the verdict, to give Jones 30 days' notice of any restructuring, refinancing, or selling of assets.

Otherwise, as Engoron noted in his verdict, Trump, his company, and his sons, Donald Trum p Jr. and Eric Trump , "are likely to continue their fraudulent ways."

Knew he was being watched

The AG's office believes Trump knew he was under investigation in March 2019. That's when the AG served her first fraud-probe subpoena, demanding records from Trump's favorite lender, Deutsche Bank .

Two months later, Trump's outside accountants, Mazars USA, got a subpoena. Cushman-Wakefield, Trump's go-to assessor, got one a month later. Trump Organization lawyers met with the AG's office regarding these subpoenas throughout summer 2019.

Yet the following Halloween, the AG's office said, Trump still issued an intentionally inflated 2019 net-worth statement, claiming he was worth $6.1 billion, well over twice his actual worth. Donald T rump Jr. and the then-Trump Org CFO Allen Weisselberg certified the statement's accuracy .

Trump was still president in 2019 and otherwise occupied. But the judge found that Trump continued frauding over the next four years as a civilian, inflating his net worth in official banking documents even as the AG's investigation pressed forward.

In 2020, more AG subpoenas snowed down. The Trump Organization got one. So did the company's leadership, from Trump on down to Patrick Birney, an assistant finance guy, trial evidence showed.

Some fun 2020 deposition facts: responding to his subpoena, Birney memorably swore that Weisselberg, the Trump Org CFO, told him, " Donald likes to see it go up. " And Weisselberg and Eric Trump invoked the Fifth Amendment more than 500 times each in their subpoena-ordered depositions.

Still, even as the AG's microscope focused ever tighter, the 2020 financial statement issued at year's end again more than doubled Trump's net worth, saying it was $4.7 billion rather than $2.2 billion, as officials say it was.

In 2021, Trump kept at it, the AG argued, even as Mazars publicly dropped Tr ump as a client and Weisselberg and the Trump Organization were indicted on payroll-tax fraud charges that a jury would convict on a year later.

"While the investigation was ongoing, defendants continued their efforts to actively conceal their fraud," state lawyers said in a filing last month .

That includes Trump "failing to turn over more than one million pages of documents" in defiance of an AG subpoena and "refusing to sit for testimony absent court order."

On October 29, 2021 — AG microscope be damned — Trump claimed that he was worth $4.5 billion, nearly $2 billion higher than his actual worth. And Eric Trump certified the claim as accurate.

"Defendants were aware of our investigation since the middle of March 2019," Andrew Amer, a lawyer for James, said in closings.

But over the next three years, "they issued three more statements of financial condition with the fraud continuing, while they knew they were under investigation for this activity."

Not his first fraud rodeo

The AG's lawyers noted that it wasn't even Trump's first fraud rodeo.

In previous years, Trump has settled allegations of fraud involving the Trump Foundation , T rump University, and the 2017 Inau gural Committee , Amer pointed out in closings.

None of these legal exposures — nor the AG's fraud lawsuit — slowed him down.

The same day James concluded her initial investigation and filed her massive Trump fraud l awsuit , on September 21, 2022, Trump incorporated "Trump Organization II" in what her office worried was an attempt to shift and protect assets.

Engoron, at this point, had already been presiding over the AG's fraud investigation for two years, repeatedly ordering Trump defendants to stop defying her subpoenas for their testimony and documents.

The judge quickly agreed with the AG's request for an in dependent monitor to oversee the Trump Organization, citing Trump's "demonstrated propensity to engage in persistent fraud."

Violations all over the place

Since her appointment just over a year ago, Jones has repeatedly criticized the Trump Organization's transparency and its sometimes-suspect money transfers.

Last August, she cited the company's "incomplete" data to lenders, accusing it of hiding in its reporting such liabilities as "refundable golf-club membership deposits."

In November — mid-trial — Jones dinged the company for failing to immediately disclose $40 million in cash transfers, money she said Trump used to pay $29 million in taxes and a $5 million civil judgment in the first E. Jean Carroll defamation case.

"It shows an inability to follow the law," Kevin Wallace, a lawyer for the New York AG's office, said during last month's closings.

And in January, Jones suggested that Trump hid an internal Trump Organization money transfer that amounts to a $48 million tax-free loan .

"Even after the Independent Monitor was in place, defendants were still incapable of complying with Court orders," the AG's lawyers wrote last month.

"In short," they added, Trump and Trump Organization leadership "have proven themselves incapable, time and again, of following the law."

But no outright fraud

Trump's lawyers have said in his defense that any discrepancies or requests for additional data have been promptly cleared up and that Jones never made any allegations of outright fraud.

"The monitor has issued five reports so far," Christopher Kise, Trump's attorney, said in the fraud trial's closing arguments last month.

"The word fraud does not appear in any one of those reports," Kise said.

But Jones is not authorized to accuse Trump of fraud, as she points out in her reports to the judge. She's just there to alert the court to anything suspicious. And there's been plenty of that.

Trump "submitted disclosures to third parties that fail to include significant liabilities," the verdict said, referring to Jones' findings.

Not only that, but "the internal accounting structure of the Trump Organization continues to be plagued by math and/or reporting errors," the verdict noted.

"There are no adequate internal controls over financial reporting in place at the Trump Organization to ensure that there will not continue to be misstatements and errors going forward."

If Trump continues to fraud like nobody's watching, Jones and a yet-designated "Independent Director of Compliance" who will report to her can propose even more drastic oversight and punishment — whatever it takes "to keep defendants honest."

That includes, under the verdict, "the restructuring and potential dissolution" of Trump's properties.

And all this monitoring? That team of skeptical accountants with their noses in his books for at least the next three years? Trump will pay their salaries, on top of his $355 million verdict, plus interest.

transfer of business act kenya

Watch: Trump fights back as fraud trial begins

transfer of business act kenya

  • Main content

IMAGES

  1. East African Development Bank Act (Cap 493A)

    transfer of business act kenya

  2. Doing Business in Kenya Guide by Doing Business Guides

    transfer of business act kenya

  3. THE TRAFFIC ACT FORM c

    transfer of business act kenya

  4. Companies act kenya.pdf

    transfer of business act kenya

  5. Companies act kenya.pdf

    transfer of business act kenya

  6. KENYA FINANCE ACT, 2021

    transfer of business act kenya

COMMENTS

  1. PDF TRANSFER OF BUSINESSES ACT

    TRANSFER OF BUSINESSES ACT [Date of commencement: 24th December, 1930.] An Act of Parliament to prevent certain fraudulent transfers of businesses [Cap. 286 of 1948, L.N. 2/1964, Act No. 15 of 1970, Act No. 9 of 1978.] Short title This Act may be cited as the Transfer of Businesses Act. Interpretation In this Act—

  2. Kenya: The Need for Change: The Transfer of Businesses Act and its

    The Transfer of Businesses Act (TBA) protects creditor interests in business transfers, but it may also create complications for distressed sales. The TBA requires a buyer to publish a notice in the Kenya Gazette and two national newspapers before buying a business or its assets, which may be difficult or impractical in distressed sales. The High Court case of Afrasia Bank vs SBM Bank highlights the need for change in the TBA.

  3. Rules in transactions/business transfers

    Kenya does not have a specific law governing employment on the transfer of a business. Normally, this is treated as a redundancy irrespective of whether alternative employment is offered by the transferee at no less favorable terms with recognition of past years of service with the transferor.

  4. Kenya: Recent changes and developments to business laws and the ...

    Executive summary. The Business Laws (Amendment) (No.2) Act of 2021 (the Act) came into force on 31 March 2021. The amendments introduced by the Act are intended to support business activities in Kenya. The key statutes amended by the Act include the Law of Contract Act, Stamp Duty Act, National Social Security Fund Act (2013), National ...

  5. Transfer law is crucial in acquisitions

    The Transfer of Business Act is sometimes overlooked in acquisition deals, exposing the buyer to liabilities, which had not been envisaged. Photo/FILE There are many legal considerations when...

  6. The Transfer of Businesses Act: Drawing the line in Corporate

    The Transfer of Businesses Act (the Act) is a 1930 law that regulates transfers of business or assets in Kenya. The High Court ruled that the Act was not inconsistent with the Banking Act and the Kenya Deposit Insurance Act, and that SBM Bank was liable for the debts of Afrasia Bank in a transfer of Chase Bank under receivership.

  7. Proposed law on automatic transfer of employees in Kenya and ...

    Kenya does not currently have a specific law governing the transfer of employees on transfer of a business. Normally, the buyer would have three options. The first option is for the seller to declare the employees redundant, irrespective of whether the buyer is offering alternative employment.

  8. New Changes to the Kenyan Business Laws: Here's what you need to know

    The Business Laws (Amendment) (No. 2) Act, 2021 (the "New Act") was passed on 30 th March, 2021. Its main purpose is to facilitate the ease of doing business in Kenya by reducing the costs and time spent on various transactions. We have set out below a detailed review of major amendments to the various laws: Law of Contract Act (Cap 23)

  9. Doing Business in Kenya: Overview

    1. What is the general business, economic and cultural climate in your jurisdiction? Economy Kenya is a market-based economy and is a key economic, commercial, financial and logistics hub for East Africa. Dominant Industries Kenya's dominant industries and sectors include:

  10. PDF A BRIEF GUIDE TO DOING BUSINESS IN KENYA, 2022

    affecting companies doing business in Kenya? • The Partnerships Act of 2012 The Partnerships Act of 2012 came into effect on 8 March 2021. As a result, the Partnership Act, Cap 29 has been repealed, save for transitional provisions. Two acts now govern partnerships in Kenya the Limited Liability Partnership Act, 2011 and

  11. PDF TRANSFER OF BUSINESSES ACT

    TRANSFER OF BUSINESSES ACT [Date of commencement: 24th December, 1930.] An Act of Parliament to prevent certain fraudulent transfers of businesses [Act No. 55 of 1930, Cap. 286 of 1948, L.N. 2/1964, Act No. 15 of 1970, Act No. 9 of 1978.] Short title This Act may be cited as the Transfer of Businesses Act. Interpretation In this Act—

  12. Business Laws (Amendment) Act, 2020 on ease of registration of

    On 20 th March 2020, the long-awaited Business Laws (Amendment) Bill 2020 ( The Act) became law. The key objective of the Act is to enhance the ease of doing business in Kenya in a bid to boost the country's ranking in the World Bank Ease of Doing Business index.

  13. PDF The Transfer of Businesses Act: Drawing the line in Corporate ...

    Banking Act superseded the Transfer of Business Act. At the time of the transfer, SBM had issued notices under the Banking Act and the Kenya Deposit Insurance Act. It however did not issue the notice under the Act. This notice, most significantly to this case, specifies whether or not the party to whom business is being transferred is assuming ...

  14. Transfer of business: Out with the old and in with the new, does not

    A transfer - a 'transfer' is defined in s197(1) to mean "the transfer of a business by one employer ('the old employer') to another employer ('the new employer') as a going concern. A transfer of a business - a 'business' includes a service, and importantly, the Labour Court held that it is the business supplying the service ...

  15. Kenya: Recent changes and developments to business laws and the ...

    The Business Laws (Amendment) (No.2) Act of 2021 (the Act) came into force on 31 March 2021. ... Transfer of personal data outside Kenya - the Act provides that d ata controllers and processors can only transfer personal data to another country where they have evidenced to the Commissioner the appropriate safeguards with respect to the ...

  16. Charging VAT on the transfer of a business bad for trade, investment

    Prior to the most recent amendment, Kenya had also adopted a similar practice. The VAT status of transfers of business as going concern should be reviewed to facilitate such transactions, foster commerce and to align with the global position on VAT on transfers of businesses. The article was featured in the Business Daily and can be accessed here.

  17. Transfer Pricing Changes Introduced by the Finance Act, 2021

    The Finance Act, 2021 (gazetted on 1 st July 2021) introduced key changes in the transfer pricing (TP) regulatory framework in Kenya.. Section 18(3) of the Income Tax Act (Cap 470 of the Laws of Kenya) read together with the Income Tax (Transfer Pricing) Rules, 2006 (TP Rules) require a taxpayer in Kenya having any transaction with its non-resident related parties to document and maintain a TP ...

  18. PDF A BRIEF GUIDE TO DOING BUSINESS IN KENYA, 2021

    business sector largely follows the European/ American model of free market economics and capitalism. The legal system in Kenya is based on: • Statutes, including statutes of general application that were in force in England on 12 August 1897; • English common law and doctrines of equity; • African customary law - this only applies in

  19. Why Kenya needs law on transfer of employees

    Since 2007 Kenya has had one of the most robust labour law regimes in the world. The Employment and Labour Relations Court is famed worldwide for its pro-employee ideology and is known to bend ...

  20. THE BUSINESS LAWS (AMENDMENT) ACT, 2020

    The Act was enacted primarily to improve the ease of doing business in Kenya by digitising transactions, reducing the formalities and documents required to complete transactions and reducing the costs of starting a business in Kenya. We highlight below the some of the changes brought about by the Act and their potential impact.

  21. Trump Keeps NY Empire Intact as Judge Rescinds Asset-Sale Order

    Donald Trump was banned from doing business in New York for three years and ordered to pay $354 million for lying about his wealth, but one thing missing from the judge's order was an earlier ...

  22. Trump Fraud Trial: Ex-Prez Couldn't Stop With the ...

    He dodged subpoenas. He kept inflating his worth. He hid a $40M transfer. Only a penchant for fraud can explain Trump's refusal to clean up his act.

  23. PDF A BRIEF GUIDE TO DOING BUSINESS IN KENYA, 2020

    • Companies Act, 2015 Kenya undertook a legislative transition from the Companies Act (Chapter 486, Laws of Kenya) (old Companies Act), which was largely based on the 1948 English companies statute to the new Companies Act 17 of 2015 (the New Act or the Companies Act). The New Act was assented to by the President on 11 September 2015 and