Law Commentaries

Business Laws (Amendment) Act, 2024: What Kenyan Businesses Need to Know

The Business Laws (Amendment) Act, 2024, effective from December 27, 2024, has ushered in transformative changes to Kenya’s business regulations. Designed to modernize the financial and commercial landscape, this legislation aligns Kenya with global best practices while promoting economic growth. For businesses, compliance with these new rules is not just a legal necessity—it’s a strategic imperative to minimize risks and thrive in a competitive market.

Overview of the Business Laws (Amendment) Act, 2024

The Act amends several critical laws, including the Banking Act, Central Bank of Kenya Act, Microfinance Act, Standards Act, Special Economic Zones Act, National Electronic Single Window System Act, Business Registration Service Act, and Companies Act. Its core objectives are to:

  • Strengthen oversight of financial institutions and credit providers.
  • Enhance consumer protections in credit transactions.
  • Regulate non-deposit-taking credit providers, such as digital lenders.
  • Promote transparency and accountability across business operations.

These changes reflect Kenya’s commitment to fostering a secure and equitable business environment while addressing challenges in the financial sector.

Key Provisions and Their Impact on Your Business

1. Regulation of Non-Deposit-Taking Credit Providers

The Act introduces robust oversight for non-deposit-taking credit providers, a category that now includes digital lenders, buy-now-pay-later platforms, peer-to-peer lending services, and credit guarantee providers. The Central Bank of Kenya (CBK) is empowered to:

  • Register and license these providers.
  • Approve operational channels for credit businesses.
  • Set pricing parameters for credit.
  • Enforce a mandatory Code of Conduct.

What This Means for Your Business:

  • All non-deposit-taking credit providers must obtain CBK licensing.
  • Non-compliance could lead to fines of up to Kshs. 20 million or three times the monetary gain from violations, with additional daily penalties for ongoing breaches.

Action Steps:

  • Determine if your business falls under this category.
  • Begin the CBK registration and licensing process immediately.
  • Consult with legal experts to ensure compliance with CBK requirements.

2. Enhanced Consumer Protection in Credit Transactions

The Act prioritizes transparency and fairness in lending. Non-deposit-taking credit providers must now:

  • Disclose all terms, costs, and risks of credit facilities to borrowers.
  • Obtain borrower consent to loan terms before disbursing funds.
  • Refrain from harassing or abusive debt collection practices.
  • Safeguard borrower data in line with the Data Protection Act.

What This Means for Your Business:

  • Transparent lending practices are non-negotiable.
  • Failure to comply risks reputational damage and regulatory penalties.

Action Steps:

  • Update your lending policies to reflect these consumer protection requirements.
  • Implement a clear complaints-handling process to resolve disputes efficiently.
  • Train staff on compliant lending and data protection practices.

3. Licensing for Credit Guarantee Businesses

The Act establishes a new framework for credit guarantee companies, requiring them to register and obtain a license from the CBK. The CBK can also impose sanctions and enforce codes of conduct.

What This Means for Your Business:

  • Unregistered credit guarantee operations face hefty penalties.
  • Compliance ensures trust and credibility with partners and clients.

Action Steps:

  • Verify that your credit guarantee operations meet CBK licensing standards.
  • Review agreements with third-party financiers for compliance.

4. Stricter Capital Requirements for Financial Institutions

The Act raises the minimum core capital requirement for banks and mortgage finance companies, with a phased increase to Kshs. 10 billion by 2029.

What This Means for Financial Institutions:

  • Non-compliance could restrict operations or lead to penalties.
  • Institutions must plan strategically to meet these capital thresholds.

Action Steps:

  • Assess your current capital levels and develop a roadmap to meet the 2029 target.
  • Engage with regulators to clarify compliance expectations.

5. Benefits for Special Economic Zones and Manufacturers

Amendments to the Special Economic Zones Act and Standards Act offer tax incentives and regulatory relief for businesses in special economic zones (SEZs). Goods sold within SEZs are exempt from certain customs duties, while manufacturers must comply with Kenya Bureau of Standards (KEBS) requirements.

What This Means for Your Business:

  • SEZ businesses can reduce costs through tax benefits.
  • Non-compliant manufacturers risk penalties for failing to meet KEBS standards.

Action Steps:

  • Evaluate your SEZ operations to capitalize on available incentives.
  • Ensure your products meet KEBS standards and maintain proper documentation.

The Cost of Non-Compliance

The penalties for violating the Act are steep:

  • Fines up to Kshs. 20 million or three times the monetary gain.
  • Daily fines for ongoing violations.
  • Potential revocation of licenses or permits.

Proactive compliance is essential to avoid these risks and maintain your business’s reputation.

Adapted from: BM Musau