Tech Companies and 30% Shareholding in Kenya

Tech Companies and 30% Shareholding in Kenya

IoT Concept- Technology and Telecomunications

On 7th August 2020, the Ministry of ICT gazette the ICT Policy, 2020, a culmination of a long journey that started in 2016 with the Draft 2016 ICT Policy.

In  this policy, the government seeks to, under equity  participation, enforce   the   requirement   that   only companies with at least 30% substantive Kenyan ownership, either corporate or individual will be licensed to provide ICT services.

Licensees will have 3 years to meet the local equity ownership threshold. However, the policy allows a one-year extension which may be obtained from the Cabinet Secretary by applying for the extension with appropriate acceptable justifications.

Currently, the requirement is that licensed companies must accomplish 20% local shareholding within 3 years which the Communications Authority, as the sector regulator has been enforcing.

We expect that the gazetting of the ICT Policy, 2020 will see the immediate implementation of  the  30% rule as Communications Authority, has  the  power  to  do  so,  drawn  from  Regulations 4 and 9 of the  KICA(Licensing and Quality of Service) Regulations, 2010, which provide that an entity applying  for a license shall ensure that its shareholding conforms to the prevailing Government  communications sector policy that is published from time to time.

Therefore, affected companies have a maximum of 4 years to comply with the local shareholding requirement.

 The Communications Authority enforces and monitors the requirement for the prevailing local shareholding in two ways.

  1. At the license application stage where an applicant is required to provide information on its    shareholding and that of any companies that hold shares in the applicant.
  2. After issuance of the license, with the annual reporting by way of annual returns which should indicate shareholding information.

The Communications Authority issues annual compliance certificates to licensees who have met all the requirements for the year. This means that licensees who do not meet the required 30% threshold within the stipulated period would not obtain a compliance certificate and would therefore not be able to continue operating.

For these reasons, ICT sector licensees need to, without delay work towards ensuring compliance.

 At Rilani Advocates, we specialize in advising our clients on the mechanics of compliance with ICT Laws and Regulations in Kenya. For more information and support on compliance, please contact us.

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