The Business Laws (Amendment) Bill, 2024

Background

The Business Laws (Amendment) Bill, 2024 is an omnibus legislative proposal aimed at amending various statutes to enhance the ease of doing business, elevate regulatory standards, protect consumers in the financial sector, and improve compliance structures within industrial, standards, and special economic frameworks.

Key Amendments

Financial and Banking Sector Regulation

• Banking Act (Cap. 488): Imposes a steep, phased escalation of core capital requirements for commercial banks to reach KSh 10 billion by the end of 2027. It also enhances the Central Bank of Kenya's (CBK) power to issue daily operational non-compliance penalties up to KSh 20 million for institutions and KSh 1 million for natural persons.
• Central Bank of Kenya Act (Cap. 491): Transitions regulatory terminology and frameworks from "digital credit" to a broader "non-deposit-taking credit provider" category. It establishes a licensing regime for "credit guarantee companies" to back credit facilities and mitigate lenders' risk.
• Microfinance Act (Cap. 493C): Brings non-deposit-taking microfinance businesses under formal licensing. Lenders with annual revenues exceeding KSh 500,000 are ineligible for exemptions.

Standards, Manufacturing, and Trade Quality Controls

• Standards Act (Cap. 496): Mandates that all manufacturers register with the Kenya Bureau of Standards (KEBS). It repeals standard levy disbursement policies and enforces product traceability from factories to consumers.
• Kenya Accreditation Service Act (Cap. 496A): Imposes mandatory local accreditation for foreign conformity assessment bodies operating in Kenya.
• Scrap Metal Act (Cap. 503): Reconfigures the Scrap Metal Council's composition, placing a chairperson with at least five years of private sector experience at the helm, alongside representatives from ministerial, regulatory, and local industry associations.

Special Economic Zones and Single Window Operations

• Special Economic Zones Act (Cap. 517A): Removes "business processing outsourcing" definitions to align with updated technology terminology. The Cabinet Secretary, guided by the Authority, is empowered to establish minimum land acreage and investment thresholds for declaring special economic zones. It guarantees tax incentives and benefits for a period of ten years.
• National Electronic Single Window System Act (Cap. 485D): Authorizes the Kenya Trade Network Agency to levy nominal fees on users of the single window platform, subject to approval by the Cabinet Secretary.

Public Procurement and Industrial Research

• Public Procurement and Asset Disposal Act (Cap. 415C / Section 157 of Cap. 412C equivalent): Reserves a minimum of 30% of procuring entities' budgets for youth, women, and persons with disabilities, ensuring payment is directly deposited into accounts where these targeted groups are mandatory signatories.
• Kenya Industrial Research and Development Institute Act (Cap. 511A): Empowers the Institute to secure and license patent rights for commercializing inventions and industrial technologies.

New Obligations

For Lenders and Credit Guarantee Providers

• Non-deposit-taking microfinance businesses must provide borrowers with transparent lending terms, including clear documentation of interest rates, fees, and procurement costs.
• Credit guarantee businesses must register and license with the CBK.

For Manufacturers

• All local manufacturers must register with KEBS, perform sample testing prior to releasing goods to the market, ensure accurate labeling (including detailed ingredients and location data), and maintain a register of product complaints and recalls.

Penalties

• Unlicensed Credit Guarantee Business: Corporate entities face a fine not exceeding KSh 10 million; natural persons face up to KSh 1 million, three years in prison, or both.
• Microfinance Debt Collection Harassment: Non-deposit-taking microfinance firms face fines of up to KSh 2 million, and individuals face up to 5 years in prison for using violence, threats, or obscene language in recovery.
• Unregistered Manufacturing: Operating as an unregistered manufacturer attracts a fine not exceeding KSh 300,000 or imprisonment for up to 3 years.
• Special Economic Zone Non-Compliance: Special economic zone developers who fail to maintain adequate accounts or records face administrative penalties of up to KSh 5 million.
• Late Levy Payments: Unpaid accreditation levies under Cap. 496A attract a penalty of 5% of the unpaid amount for every month it remains outstanding.

Transitional Provisions

• Credit Guarantee Businesses: Entities active before the commencement of this Act have up to five (5) years to obtain registration and licensing.
• Microfinance Businesses: Existing non-deposit-taking microfinance businesses must apply for a CBK license within six (6) months of the Act's commencement. They may continue operating during the determination of their application.