Private Limited Companies are the preferred business structure for many entrepreneurs starting or restructuring a business in Kenya. It is also preferred by investors and credit providers.
This guide breaks down everything you need to know about Private Limited Companies in Kenya.
What Is a Private Limited Company?
A Private Limited Company (abbreviated “LTD”) is a company registered under the Companies Act, 2015. It is privately held by shareholders and limits the liability of its shareholders.
Key Characteristics of a Private Limited Company in Kenya
A Private Limited Company has the following characteristics:
- It is a legal personality, separate from the owners.
- It provides limited liability for its shareholders to the amount unpaid on their shares.
- It must have at least one director and one shareholder.
- Limited to a maximum of 50 shareholders.
- It cannot offer shares to the public.
- It is subject to strict tax and compliance obligations.
This structure is ideal for businesses in most sectors of the economy, regardless of their size. These include startups, SMEs, family businesses, consultancies, and professional practices that want limited liability and credibility without going public.
Why Choose a Private Limited Company?
A Private Limited Company offers several advantages:
- Limited Liability Protection: The shareholders’ personal assets are protected — their liability is limited to the unpaid value of their shares.
- Separate Legal Entity: The company can own property, enter into contracts, sue, and be sued in its own name.
- Ease of Ownership Transfer: Shares can be sold or transferred (subject to shareholder agreements), which makes growth and exit planning easier.
- Investment-Ready: Many investors and credit providers, including Venture Capital Firms and banks, prefer Ltd companies due to their structure, transparency and the ease with which they can transfer shares or use company assets as security.
- Professional Image: Private Limited Companies are seen as more credible and structured, which can attract investors, clients, and contracts.
Legal Framework Governing Private Limited Companies in Kenya
The registration and operation of Private Limited Companies are governed by the Companies Act, 2015, which replaced the outdated Cap 486. Some key legal highlights:
- Section 11: Defines company types, including private companies
- Section 13–18: Covers incorporation requirements
- Section 495: Discusses the obligation to prepare and file annual returns
- Schedule 2: Provides model Articles of Association for private companies
The law sets out both the procedural and compliance framework for private limited companies, including shareholding, directorship, record-keeping, and dissolution.
How to Register a Private Limited Company in Kenya
Pre-Registration
We have written a comprehensive article: How to Register a Private Limited Company. Here is a summary for our purposes:
- Reserve a Business Name.
- Prepare and lodge all the Incorporation documents, including:
- CR1: Application form for company registration,
- CR2: Model memorandum for a private company,
- CR8: Notice of residential address of directors,
- Statement of nominal capital and shareholding, and
- Copies of ID/passport, KRA PIN, and passport photos of each director/shareholder; and
- Pay the registration fees.
At the end of the process, the company is issued a Certificate of Incorporation.
Post Registration
Once registration is completed, the company is expected to :
- Apply for a KRA PIN.
- Open a Company Bank Account to ensure personal and company funds are kept separate.
- Obtain relevant licenses and business permits as applicable.
- Register for SHIF and NSSF, especially if hiring employees; and
Compliance, Maintenance and Tax Obligations
To ensure legal compliance, a Private Limited Company is under obligations to:
- File Annual Company Returns: The company must file annual company returns with the Registrar of Companies.
- Maintain Proper Company Records: An LTD must maintain:
- A company register;
- Minutes of meetings;
- Shareholder and director registers; and
- Financial and tax records
- File Monthly Tax Returns: These include PAYE for employees and VAT if applicable.
- File Annual Tax Returns: Private Limited Companies are subject to corporation tax and must file tax returns by the 31st of June every year.
- Remit Taxes and Employee Deductions: The company must remit all taxes and employee deductions to the appropriate entity/authority.
Common Pitfalls When Setting Up a Private Limited Company
Many Kenyan business owners run into avoidable legal and compliance issues:
- Skipping shareholder agreements: Disputes often arise when there’s no clear shareholder framework.
- Wrong company name structure: Some names are rejected for violating naming rules or being misleading.
- Non-compliance with tax or labour laws: This leads to penalties and loss of tax compliance status.
- Mixing personal and business finances: This defeats the purpose of a limited liability structure.
- Failure to issue shares or file beneficial ownership information: Now mandatory under new rules.
Engaging appropriate professionals like lawyers, accountants, and company secretaries ensures you avoid costly mistakes at the start.
When Should You NOT Use a Private Limited Company?
While the Ltd structure is advantageous, it may not be the best choice if:
- You want minimal compliance or formalities, a sole proprietorship might be more suitable.
- You offer professional services under your name only (consider a sole proprietorship, a General partnership or a Limited Liability Partnership)
- You have more than 50 shareholders, want to raise public funds or list on the NSE, in that case, a public limited company is more suitable.
If you’re still unsure, seek tailored legal advice based on your business goals.
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Frequently Asked Questions (FAQs)
What is the minimum number of shareholders for a private limited company in Kenya?
One. A private company can be registered with just one shareholder and one director.
Can a foreigner register a private limited company in Kenya?
Yes, a foreigner can register a company, but they must comply with immigration and tax laws, including obtaining a KRA PIN.
How much does it cost to register a private limited company in Kenya?
Approximately Kshs. 10,650 for basic registration. Additional costs apply for legal drafting, high share capital, or professional services.
Is a company secretary required?
Only if the company has a paid-up capital of Kshs. 5 million or more, or is a public company.
How long does it take to register a Private Limited Company?
With all documents ready, the process takes 3–5 working days via the eCitizen portal.
Need Help Registering a Private Limited Company?
We assist individuals and businesses, local and foreign, with seamless company registration, compliance, shareholder agreements, and restructuring services.
Schedule A Consultation with our team, Email Us or fill out the form on our Contact Us page for more personalized assistance.
Let us handle the paperwork so you can focus on building your business.
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