[Kictanet] Fw: KICTANET REGISTRATION VARIOUS OPTIONS

[alice at apc.org]

Dear all

Find attached and below various options for KICTANet registration submitted
by Dr. Ben Sihanya.
We are going to have a moderated discussion beginning Monday next week for
seven days on this issue so we can conclude this matter.

best regards
alice
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Option 1:            Incorporation of a Company Limited by Guarantee

The Companies Act (Cap. 486 of the Laws of Kenya) defines a company limited
by guarantee as "a company having the liability of its members limited by
the memorandum to such amount as the members may respectively thereby
undertake to contribute to the assets of the company in the event of its
being wound up." Such companies usually include associations where trade is
carried on but the profits are employed in furthering the objects for which
the company is formed. A company limited by guarantee may or may not have a
share capital. If the company has a share capital the signatories must
subscribe for at least one share, as is the case in a limited company. In
this case therefore, each member will also be liable for the amount, for the
time being, remaining unpaid on the shares held by him/her. A company
limited by guarantee is required by law to clearly states, in its
memorandum, the company's objects and that the liability of its members is
limited. In addition, it shall have the word "limited" appearing as the last
word of the company name. Please note however that associations that are not
for profit may dispense with the use of the word "limited" after its name.



Optimistically, it would probably take anywhere between one to three months
to incorporate a company limited by guarantee. However, incorporation of
such companies has been known to take about six (6) months to two (2) years!
The reason for this is that such applications were in the past forwarded to
the President's office whereupon verification of the particulars of the
proposed directors was made. It seems that the rationale at the time was
that there was possibly a suspicious motive behind such companies and thus
why they did not wish to be incorporated as companies limited by shares.
Today however, the process has theoretically improved though it is
practically not viable in KICTANET's case (Issue of shareholding, appointing
shareholders, directors, handling share transfers and such would complicate
the organisation's operations).





Option 2:            Registration of a Charitable Trust

A trust is a legal entity in itself and is established as soon as all the
trustees sign the trust deed. A trust deed is the written instrument signed
under seal by all the trustees in the presence of an independent witness. It
stipulates the objects and rules of the trust including the regulations
thereof. For it to be considered a charitable trust, the trustees must have
constituted themselves for a religious, educational, literary, scientific,
social, athletic or charitable purpose. It may be of interest to note that
what is otherwise regarded to be a "foundation" is technically a trust. In
Kenya, a foundation is established in the same way as a trust and is similar
in all other aspects save for the fact that the parties to a foundation are
referred to as founders/ settlers with additional persons appointed in the
deed as trustees.



In order to give the trust its own "corporate" identity and enable it make
arrangements under seal in much the same way as a limited company, the trust
is thereafter registered under the Trustees (Perpetual Succession) Act
whereupon a Certificate of Registration is granted. This enables the trust
to sue and be sued in its own name (as opposed to those of the trustees) and
is especially useful where the trust wants to hold interest in movable and
immovable property (i.e. land) in its name rather than in the individual
trustees' names. In addition, by registering an organization as a trust, it
may ultimately be possible to apply for charitable status. Eligibility for
such status is obtained once the trust complies with the requirements of the
Kenya Revenue Authority. My experience has been that a duly registered trust
must have very strong justification for applying for charitable status with
the general expectation of the authorities being proof that the objects of
the trust are for the benefit of the majority of, or better still, all
Kenyans rather than a narrowly defined group of beneficiaries.



Further, in 2003 stringent measures and requirements were introduced by the
Lands Registry, where trusts are registered, and these have caused the
registration of trusts to take anywhere from a year to register. In fact,
the Minister in charge at the time declared that turns would no longer be
registered under his Ministry but instead, under the Societies Act. The
Registrar of Societies responded in writing by stating that they too would
not register trusts as it was not their mandate! The stalemate remains to
date and applications for registration under the Trustee (PS) Act dating
back to 2003 are still pending!



It is nonetheless important to note that a trust deed duly registered at the
Registry of Documents (but not under the Trustee (PS) Act) is sufficient
proof of the existence of a trust and can be used, for instance, to open
bank accounts in the name of the trust and employ people etc.
Non-registration of a trust under the said Act does not mean that the trust
is non-existent.



Option 3:            Registration of an NGO

The Kenya Non-Governmental Organisations Co-ordination Act of 199 defines a
non-governmental organisation (NGO) as a private, not-for-profit, voluntary
grouping of individuals or associations organised nationally or
internationally for promotion of social welfare, development, charity or
research through the mobilisation of resources.



A local NGO refers to that organization registered in Kenya and only
operates in two (2) districts in Kenya while a national NGO is registered in
Kenya and can operate in any area within Kenya. An international NGO on the
other hand is registered in Kenya and can operate within or outside of
Kenya.



NGOs in Kenya are under intense scrutiny from the government and the NGO
Co-ordination Board which was established to co-ordinate the activities of
all NGOs and to consider applications for registration of NGOs. In addition,
the Board advises the government on NGO activities and their role in
development within Kenya as well as approves the Code of Conduct which
governs the self-regulation of NGOs and their activities The Board is a
Government entity under the Ministry of Home Affairs in the Office of the
Vice-President. Since the Board meets four times a year to conduct business,
the length of time it takes to register an NGO is dependent upon the time
one submits their application relative to the Board meetings.



Please also note that there exists an arm of the Board, which operates in
the field and reports to the Board on a weekly basis on the effectiveness of
projects or activities of NGOs all over the country. Such regular checks and
balances ensure proper conduct by NGOs. The NGO Co-ordination Act, 1990
provides that registered NGOs must submit to the Board annual reports of
their activities in the prescribed format although it is wise to submit
reports on a quarterly basis together with audited reports for that quarter,
as opposed to at the end of the year.



Upon registration, the organization will be issued with a Certificate of
Registration which is valid for sixty (60) months and renewable upon
application. In addition, please note that upon registration, all NGOs are
supposed to be members of the Kenya National Council of Voluntary Agencies.
This is a collective forum through which the NGOs and the Government can
meet annually to discuss the difficulties encountered in their activities
and the NGOs can recommend ways in which the Government can better assist
them achieve their objectives. The Council also acts as an arbitrator for
disputes within and between NGOs or between NGOs and courts etc. Where
disciplinary cases are referred to the Council for consideration and the NGO
in question is found guilty of an act or omission contrary to the NGO rules
of conduct yet remains unwilling to make amends, then such cases are
forwarded to the Board for actioning. All this notwithstanding, issues
related to the Council's constitution and membership are uncertain and, as
far as I am aware, there are actually NGOs that are not members of the
Council.



Option 4:            Registration of a Society

Societies are governed by the Societies Act (Cap. 108, Laws of Kenya). A
society is defined under the Act as any club, company, partnership or other
association of ten or more persons, whatever its nature or object,
established in Kenya or having its headquarters or chief place of business
in Kenya. The Act specifically provides that the following are not
societies:

·          A company registered under the Companies Act, or a branch office
of a foreign company;

·          Any corporation incorporated by or under any other written law;

·          A registered trade union;

·          A company, firm, association or partnership consisting of not
more than 20 persons formed with the view of carrying on business for
profit;

·          A registered co-operative society;

·          A school registered under the Education Act;

·          A building society defined by the Building Societies Act;

·          A bank licensed under the Banking Act;

·          An international organisation of which Kenya is a member, or any
branch, section or organ of any such organisation;



Every society is required to apply for registration to the Registrar of
Societies within 28 days after formation. In applying for registration, a
society is first required to conduct a search of the Registry to confirm
that there are no existing societies with the same name. The application
process includes submitting an application form, a copy of the constitution
or rules of the society and a notification of the registered office of the
Society. In particular, the Society should have at the very least, three
appointed officers who shall be required to sign the application forms.
Appointments are, therefore, done even prior to application for
registration.



Once the Registrar receives the application, he should communicate his
decision on whether or not to register the Society and if the former,
arrange for a Certificate of Registration to be issued and the Society to be
published in the Kenya Gazette.



Please note that registration under the Societies Act presumes that the
Society has already been constituted and is operational prior to the
application for registration. In fact, once an application for registration
is made, officers from the Registrar's office are required to visit the
registered office of the Society to confirm if indeed the Society is
operational. Whether or not this actually happens is another matter
altogether, although in the recent past there has been effort on the
Registrar's part to ensure that this is complied with, the result being that
the entire process has been known to take over 6 months to conclude.
Nevertheless, the Registrar has been clearing the backlog accumulated over
the years and, as far as I am aware, the registration process has since been
less time-consuming.





Finally, please note that for any transaction carried on in Kenya, a
Personal Identification Number (PIN) is required. As such, whatever
organization you chose to register would have to apply for a PIN Certificate
upon its registration. This is a fairly straightforward matter.



You should also seek the opinion of a registered auditor in Kenya regarding
issues of tax implications of the above organisations such as employee's tax
returns, work permits, tax exemptions and the like.



I trust that the above information is of some assistance in determining what
type of entity to register in Kenya. In my view is that the fourth option
would be most viable for KICTANET's present needs.



----- Original Message ----- 
From: "Innovative Lawyering" <sihanya at innovativelawyering.com>
To: <alice at apc.org>
Cc: <n_awino at hotmail.com>
Sent: Wednesday, April 05, 2006 3:25 PM
Subject: RE: KICTANET REGISTRATION


> Dear Alice,
>
> I wont be able to attend today's emergency KICTANet meeting. Kindly accept
> my apologies. Please keep me posted on any of the decisions made at this
> meeting. I have attached two opinions for your perusal and comments.
>
> Thank you.
>
> Yours sincerely,
>
> Dr Ben Sihanya, Advocate
> ___________________________________________________________________________
> Dr Ben Sihanya, Ph.D. (Stanford)
> Teacher, Intellectual Property Attorney, Author, CPS (K), Consultant
> Intellectual Property, Constitutionalism, and Communication Law
> Chair, Department of Commercial Law
> University of Nairobi Law School & ©opyright Africa & Innovative Lawyering
> Trainer on TRIPs, WTO's Regional Trade Policy Course, University of
> Namibia
> Parklands Law Campus, Room B10
> Box 1313, Sarit Centre, 00606 Nairobi, Kenya
> Telefax (254-20) 3741769 (O); +4343259 (H); Cell: +722897825
> email: copyrightafrica at innovativelawyering.com;
> sihanya at innovativelawyering.com
> :innovativelawyer at wananchi.com;url:www.innovativelawyering.com
>
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