KENYA Law and Practice Contributed by: Walid Khan, Ruth Wangui Rukwaro and Christina Wanjiku Wood, Africa Law Partners
3. Structuring and Documentation 3.1 Restrictions on Foreign Lenders Providing Loans Licensing Requirements The Business Laws (Amendment) Act, 2024, which expanded the CBK’s mandate in regulating credit pro- viders to include the regulation of non-deposit taking credit providers, arguably extends to foreign lenders offering debt to Kenyan entities. Foreign lenders are now required to register a local presence in Kenya and obtain a licence from CBK to lend to Kenyan entities. Registration Under the Companies Act Foreign lenders that are “carrying on business” in Kenya must register as a foreign company under the Companies Act, 2015 to gain legal standing in Kenya. Whereas some decisions by Kenyan courts required foreign entities to establish local presence in Ken- ya (through registration) in order to access Kenyan courts, the most recent decision was to the effect that foreign entities need not register locally to access Kenyan courts. The courts in the previous decisions interpreted “carrying on business” to include lending. That notwithstanding, the process of registering a for- eign entity in Kenya would be as follows: • filing incorporation documents with the Companies Registry; • paying registration fees, depending on the share capital; and • obtaining a Certificate of Compliance within 30 days of commencing business. 3.2 Restrictions on Foreign Lenders Receiving Security Subject to meeting licensing and registration require- ments, foreign lenders are permitted to take secu- rity interests or guarantees over Kenyan assets, but enforceability is subject to compliance with Kenyan registration, stamping and perfection requirements. The process is largely governed by the Movable Prop- erty Security Rights Act, 2017 (MPSRA), the Land Act, 2012, and the Companies Act, 2015. While there is no outright prohibition, failure to meet statutory formali- ties can render security unenforceable against third parties.
Types of Security Available to Foreign Lenders The following types of security are available to foreign lenders. • Land and real estate – Charges or mortgages must be registered at the Lands Registry under the Land Act. Non-citizens (including foreign-owned companies) cannot own freehold land but can take leasehold interests (maximum 99 years). • Movable assets – Security over movables (equip- ment, receivables, inventory) is registered on the Collateral Registry under the MPSRA. • Company assets – Charges created by Kenyan companies must be registered with the Companies Registry within 30 days under the Companies Act. • Shares – Security over shares in a Kenyan com- pany requires notation in the company’s register of members and, for listed companies, notification to the Capital Markets Authority (CMA). Stamping and Perfection The following apply to foreign lenders. • Unless exempt, security documents must be stamped under the Stamp Duty Act, typically at 0.1% of the secured amount. • Stamping must occur within 30 days of execution if signed in Kenya, or 30 days of receipt if executed abroad. Late stamping attracts penalties. • Perfection of security ensures priority over other creditors and enforceability in insolvency proceed- ings. Practical Considerations for Foreign Lenders The following practical considerations apply. • Foreign lenders may appoint a local security agent or trustee to hold collateral and facilitate registra- tion. • In cross-border financings, security is often gov- erned by Kenyan law. 3.3 Restrictions and Controls on Foreign Currency Exchange Kenya operates a liberalised foreign exchange regime, meaning there are no exchange controls restricting the holding, transfer or conversion of foreign cur- rency. However, the system is closely monitored by
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