Several steps need to be taken before filing an official application (form CR 1) for the registration of a company. These steps help ensure that the registration process goes smoothly and that the business is set up for long-term success.
The company registration process is governed by the Registration of Business Names Act, the Companies Act, and any sector-specific laws and regulations applicable at the time of registration.
Below is an overview of the steps one should take before the registration of a company in Kenya.
The Steps to Take Before Registration of a Company
1. Decide on the Business Structure
The first step in the registration process is to determine the most suitable business structure for your goals. Kenya offers several types of business associations including sole proprietorships, different types of companies, and different types of partnerships. For our purposes here, we will only focus on companies.
After thorough research, select the appropriate type of company that aligns with your business objectives.
2. Understand Legal and Tax Implications
Understanding the legal and tax implications of your chosen business structure is critical. Legal compliance ensures that your business avoids fines, penalties, or legal disputes. For instance, private companies have different legal, reporting and tax obligations compared to public companies. A private company requires a minimum of one member, whereas a public companies must have a minimum of seven members and appoint a Company Secretary. Familiarizing yourself with these requirements early on is crucial.
3. Conduct a Name Search and Reserve Your Comany Name
Before moving forward with the registration, perform a name search to ensure your desired company name is available. Keep the following principles in mind:
- Uniqueness: The name must be unique and not the same as another company’s name. You can check the availability of a name by conducting a name search.
- Length: The name cannot contain more than 160 characters.
- Similarity: The name cannot be phonetically similar to a registered name. It also cannot be identical to or similar to a reserved name.
- Meaning: The name should not be abusive, offensive, or illegal.
- Relevance: The name should not be misleading and align with the nature of the business and help customers find it.
Once you’ve decided on your company name, use the e-Citizen platform to conduct a name search and reservation::
- Submit at least three preferred names in order of priority
- The registrar will search the names and assign the first available name to your company
- The name will be reserved for 30 days, and may on application be extended for a period not exceeding sixty (60) days as the registrar may allow.
4. Obtain Pre-Approval for Sector-Specific Licenses
Certain businesses in Kenya, such as those in telecommunications, law, health, engineering, immigration, banking, and finance, require sector-specific approvals before you can proceed with registration. You must check whether your business needs any such approvals such as a letter of no objection.
A sector-specific pre-approval can only be obtained when you already have a name reservation certificate and meet the other requirements under that sector. For example, for a professional business such as law or engineering, the applicant must already meet their education criteria, a bank must have the required maximum capital, etc.
5. Appoint a Legal Advisor and/ or Company Secretary
It’s always wise to consult with a lawyer before you start the registration process. A legal advisor can help you register your company, explain the implications of the type of entity you choose, assist with compliance with the applicable laws, and ensure that all necessary paperwork is filed correctly.
6. Determine Share Capital and Shareholders
Before registration, decide on the amount of share capital your company will issue and how these shares will be distributed among the shareholders. This decision is critical for both private and public companies.
7. Prepare Key Documents
The main requirements for company registration include several key documents. The Articles of Association is the most important document required for company registration as it outlines how the affairs of the company will be managed.
Other key documents include the Application for Registration( form CR1), the Memorandum of Association (form CR2) the Statement of Nominal Capital, the Notice of Appointment of Directors and their Particulars (form CR6), and the residential address of the directors (form CR8).
8. Plan for Tax Registration
Before registration, you should be aware that your company will need a KRA PIN for tax purposes. You may also need to register for Value Added Tax (VAT). Planning for tax registration ahead of time ensures that your business will comply with VAT, PAYE, Income Tax, and other tax obligations as and when they fall due.
Conclusion
Before registering a company in Kenya, it’s crucial to lay a solid foundation. Steps like conducting a name search, deciding on the appropriate business structure, and preparing key documents will help ensure a smooth registration process. Engaging a legal advisor early can help you navigate complex legal and tax requirements, making it easier to start your business on the right foot.