Tech Companies and 30% Shareholding in Kenya
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.
- 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.
- 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.