Kenya's Business Laws (Amendment) Bill, 2024

Kenya’s Business Laws Amendment Bill 2024, which President William Ruto signed into law this December, has been making waves in the business community, with proponents praising it as a bold move to streamline business operations and critics questioning whether it truly addresses the core challenges entrepreneurs face and if it’s just adding another layer of bureaucracy.

According to the government, this legislative proposal, which seeks to amend multiple existing laws, “aims to enhance the ease of doing business, attract foreign investment, and promote economic growth”. However, its potential impact sparks both hope and skepticism among stakeholders.

The Business Laws Amendment Bill 2024 is among 7 Bills that  President William Ruto signed into law last week that also include the Tax Laws (Amendment) Bill, the Tax Procedures (Amendment) Bill, and the Kenya Revenue Authority (Amendment) Bill.

What’s in the Bill?

The Business Laws Amendment Bill 2024, which was sponsored by the Leader of the Majority Party, Hon. Kimani Ichung’wah, introduces changes to nine Acts of Parliament that govern the business landscape in Kenya to enhance regulatory oversight, streamline processes, and promote economic stability. These include amendments to the Companies Act, the Insolvency Act, the Registration of Business Names Act, and the Tax Procedures Act, among others.

Key highlights of the bill include:

Digital Transformation
The bill proposes digitizing the process of business registration and licensing. Entrepreneurs can now register businesses, file annual returns, and apply for licenses online, significantly reducing the time and cost previously spent navigating cumbersome bureaucratic procedures.

Tax Incentives for Startups
To support innovation and entrepreneurship, the bill introduces tax breaks for startups, particularly in the technology and green energy sectors. Startups that meet specified criteria will enjoy reduced corporate tax rates for their first five years of operation.

Streamlined Insolvency Processes
Businesses facing financial distress will benefit from simplified insolvency procedures, making it easier for companies to restructure or exit the market without prolonged legal battles.

Strengthened Consumer Protection
The Kenya Business Laws Amendment Bill 2024, also includes provisions to enhance consumer rights, ensuring businesses adhere to fair trade practices and maintain quality standards in goods and services.

Under the Banking Act, the amendments seek to improve financial sector resilience. These include stiffer penalties for institutions violating CBK guidelines and a phased increase in minimum core capital requirements. Banks and mortgage institutions will be required to meet a core capital threshold of Ksh 1 billion by the end of 2024, progressively rising to Ksh 10 billion by 2027.

The phased approach will attract global investors while allowing local banks time to adapt.

Potential Gains of Kenya’s Business Laws Amendment Bill 2024

For a country looking to position itself as a regional business hub, these amendments are a step in the right direction. The emphasis on digitalization could reduce corruption by limiting face-to-face interactions with government officials.

Additionally, the tax incentives for startups align with Kenya’s vision of fostering innovation and attracting investors to sectors that have the potential for long-term economic impact. This, if done well will be a major shot in the arm for Kenya’s youth, who make a good number of start up ventures.

Moreover, with insolvency laws being more business-friendly, companies facing financial challenges will have a better chance of recovery, safeguarding jobs and ensuring economic stability.

According to Philip Mwangale, Law & Governance Specialist at Gibbor Group Africa, the provision in the Business Laws Amendment Bill 2024 that will see the Central Bank of Kenya  protecting lenders as now CBK will be regulating non-deposit taking institutions is a key step.

Concerns from Stakeholders

Despite its promise, the Business Laws Amendment Bill 2024 has not been without criticism. Many small and medium enterprises (SMEs) have raised concerns about the actual implementation of the proposed changes. For example, while digitization is a noble goal, access to reliable internet and digital literacy remains a challenge in many parts of Kenya.

Similarly, while tax incentives are beneficial, some experts argue that the criteria for qualifying startups could exclude many entrepreneurs, particularly those in the informal sector who need the most support.

Additionally, there is concern over whether the bill adequately addresses the high cost of compliance for small businesses. Many SMEs struggle with complex and often expensive regulatory requirements, which are a significant barrier to growth.

Under the Business Laws (Amendment) Bill, 2024, Kenya’s minimum capital requirement for banks will rise from Sh1 billion to Sh10 billion by 2029. This will likely see small banks that cannot raise the minimum sh 10B capital either close down or merge with bigger lenders.

A Call for Inclusive Implementation

To ensure the bill achieves its intended purpose, the government must engage in meaningful dialogue with all stakeholders, including SMEs, startups, and consumer rights groups. It is crucial to address potential loopholes that could be exploited by larger corporations while leaving smaller players disadvantaged.

Furthermore, investments in infrastructure, particularly in digital connectivity, will be key to ensuring that businesses across the country can benefit from the new laws. Training programs to improve digital literacy among entrepreneurs should also accompany the shift to online processes.

What This Means for Future of Businesses in Kenya

If implemented effectively, the Business Laws Amendment Bill 2024 could mark a significant milestone in Kenya’s journey toward becoming a more business-friendly economy.

According to Philip Mwangale, Law & Governance Specialist at Gibbor Group Africa, the provsison in the Business Laws Amendment Bill 2024 that will see the Central Bank of Kenya  protecting lenders as now CBK will be regulationg non-deposit taking institutions is key step

It has the potential to attract much-needed foreign investment, create jobs, and foster innovation. However, without addressing the practical challenges that many businesses face, particularly those in the informal sector, the bill risks becoming just another piece of legislation with limited impact.

The government has a unique opportunity to use this bill as a tool for transformative change. By prioritizing inclusivity, transparency, and efficiency.

You can read the Kenya Business Laws Amendment Bill 2024  here.