KENYA Law and Practice Contributed by: Anne Kinyanjui and Bonface Abuya, DLA Piper Africa, Kenya (IKM Advocates)
3.8 Lenders’ Liability Under Environmental Laws Kenyan courts apply the “polluter pays” principle, under which the person responsible for environmental damage is liable for it. A lender is not liable for non-compliance with environ - mental laws since a legal charge does not constitute a transfer of the property. However, when enforcing the security by the appointment of a receiver or the leasing or taking possession of the charged property, a lender qualifies as an “owner” under the EMCA and will therefore be liable for non-compliance with envi - ronmental laws. 3.9 Effects of a Borrower Becoming Insolvent A borrower’s insolvency does not, in and of itself, affect a lender’s security interest. However, where an administrator has been appointed, the consent of the appointed administrator or approval of a court of competent jurisdiction would need to be obtained in order to enforce security. In addition, although an administrator’s proposals may not affect the rights of a secured lender without that lender’s consent, the secured lender’s remedies are still subject to the insol - vency process and any applicable court supervision. Security may be challenged if it was granted at a rel - evant time before insolvency as a preference, or as part of a transaction at an undervalue, and the court’s remedial powers include releasing or discharging that security. 3.10 Taxes on Loans The following taxes apply to loans. • Withholding tax (WHT) at a rate of 15% is payable on interest income earned by resident and non-res - ident persons, subject to any applicable statutory exemption or treaty relief. • Deemed interest where the loan is provided free of interest WHT is also applicable to such deemed interest. The Kenya Revenue Authority (KRA) deter - mines the deemed interest rate and WHT rate. The deemed interest rate is published periodically by KRA, while the WHT rate is 15%. Banks and other financial institutions licensed under the Banking Act, Chapter 488 are exempted from paying taxes on deemed interest.
• Excise duty at a rate of 20% is imposed on fees charged by financial institutions. This does not apply to interest on loans or returns on loans.
4. Planning and Zoning 4.1 Planning and Zoning Framework
The national government is responsible for develop - ing planning policies and co-ordinating planning by the county governments, and the county governments are responsible for county planning and development. The principal laws for strategic planning and zoning in Kenya are the Constitution, the Physical Planning Act, the Urban Areas and Cities Act, the National Build - ing Code, 2024, the EMCA, the NCA Act, applicable county legislation, zoning instruments and develop - ment plans. The principal public authorities involved are: • the NLC, which manages public land on behalf of the national and county governments, and over - sees land use planning and development; • the relevant county government and its planning organs (the Directorate of Physical and Land Use Planning at the national level); • the National Environment Management Authority (NEMA) for environmental approvals and enforce - ment; • the NCA for contractor and project registration and construction oversight; • the ELC and the statutory physical and land use planning liaison committees for appeals and plan - ning disputes; and • sector regulators where the development affects a regulated area or activity (eg, dealings in agricul - tural land requiring LCB consent). 4.2 Development Process, Challenges and Enforcement Process The Physical Planning Act requires development per - mission to be obtained prior to the improvement of land, which entails the submission of building plans prepared by a qualified planner. The development per - mit will be issued only if the development complies
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