KENYA Law and Practice Contributed by: Sammy Ndolo, Brian Muchiri, Damaris Muia and Nicole Gacheche, Kieti Law LLP
Dormant Company A dormant company is one that has not traded or has minimal activity during the year. However, this exemption does not apply to companies in specific industries, even dormant ones. These industries include insurance companies, bank - ing companies, and e-money issuers. Audits Even if a company falls under the small or dor - mant company exemptions, its members (own - ers or shareholders) can still require an audit by providing formal notice to the company. The company’s directors or members vote to appoint and remove an auditor. A simple majority vote is required for appointment, but a special res - olution from the members is required for removal. 7.2 Requirements for Directors Concerning Management Risk and Internal Controls The Companies Act and the CMA Governance Code establish specific requirements for direc - tors in relation to risk management and internal controls. • Directors’ report – Directors must prepare a report for each financial year. This report should include a business review detailing the company’s principal risks and uncertainties. • Internal control systems – The boards of listed companies must: (a) establish and regularly review the ade - quacy and integrity of the company’s internal control systems; (b) ensure compliance with applicable laws and regulations; and (c) establish an effective risk management framework.
lodge a copy of the register of beneficial owners after being directed to do so by the Registrar. The Registrar of Companies has broad powers to ensure compliance with corporate obligations. These include the authority to strike off compa - nies from the register if they appear inactive – such as those that have not submitted annual returns or financial statements for an extended period or have not provided their register of ben - eficial owners after being instructed to do so. In line with these powers, BRS issued a compli - ance notice on 11 April 2025 to private compa - nies that have not filed their register of beneficial owners. The notice warned that non-compliant companies may be presumed inactive or not operating, which could result in their removal from the official register of companies. 7. Audit, Risk and Internal Controls 7.1 Appointment of External Auditors Companies are generally required to appoint an independent auditor to review their annual finan - cial statements. There are exemptions for small and dormant companies. Small Company A company qualifies as “small” if its turno- ver for the relevant year does not exceed KES50,000,000 (approximately USD387,570) and the value of its net assets at the end of the financial year does not exceed KES20,000,000 (approximately USD155,026).
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