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Brief on types of companies registrable in Kenya

As it currently stands there are 2 broad types of registrable companies in Kenya – a local company and a foreign company.

A local company is one that is incorporated in Kenya under the laws of Kenya. It may be a limited liability company, of which the majority of registered companies in Kenya are, or it may be an unlimited liability company. A limited liability company means that the liability of its shareholders (generally also referred to as members) is limited to the extent of their shareholding. The limitation on liability of shareholders makes limited liability companies an attractive option. Additionally, a company may be limited by guarantee, this being the case mostly for charitable organisations. Unlimited liability companies are the converse of limited liability companies, in that the liability of members is not limited. Furthermore, a local company may be private or public. Most limited liability companies are private, and this restricts their ownership to a maximum of 50 members whereas public companies do not have restricted shareholding but are at times subject to more stringent regulations. Companies listed on the Nairobi Securities Exchange, for example, are public companies. A local company can be incorporated with at least 1 shareholder and 1 director. The Companies Act 2015 revised the law requiring at least 2 directors, thus, allowing for the “one-man” company. Such director may be a Kenyan national or a foreigner who has obtained an alien ID card, a KRA PIN and ultimately a work permit.

A foreign company is one that is incorporated outside Kenya and its directors are seeking its registration in Kenya and not its incorporation. Once registered and recognised in Kenya, the law treats it as a “legal foreign entity”, which has certain impacts on its operations including a higher tax incidence among other factors.

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