Introduction
Kenya’s technology sector continues to grow rapidly and is positioned as one of the leading innovation hubs in Africa. With this growth, the government of Kenya has in place several laws to regulate the activities of the technology industry. The purpose of these laws extends to the protection of consumers and the technology companies themselves.
This article provides an overview of the laws affecting technology companies in Kenya and provides insights into how technology businesses operating in the country can remain compliant with the law, protect their IP, and enhance their rights, those of their employees and the consumers of their products.
Business Registration and Licensing
Business Registration
All businesses, including technology companies, must be registered with the Business Registration Service (BRS) to legally operate in Kenya.
Depending on your needs and long-term goals, you can register a technology business as any of The Different Types of Companies in Kenya. Incorporated and regulated under the Companies Act, Limited Liability Companies are the most secure type of business entity, creating a separate legal entity with limited liability for its debts. Therefore, technology companies more often than not chose registration as Limited Liability Companies.
The registration of a Limited Liability Company involves a series of steps as we have outlined in How to Register a Company in Kenya. Once registration is complete, you should also register with other relevant authorities, including the Kenya Revenue Authority, the National Social Security Fund, and the Social Health Insurance Fund. This ensures compliance with tax obligations, including obtaining a Personal Identification Number (PIN) and Value Added Tax (VAT) registration and the payment of all applicable taxes and the deduction and remittance of employee related obligations.
Licensing Requirements
Depending on the nature of its business, a technology company may require additional industry-specific licensing and or approval such as:
- A Communications Authority of Kenya (CAK) License for companies offering internet, telecommunications, or broadcasting services.
- Capital Markets Authority (CMA) Approval for companies providing investment or securities-related services.
- A Central Bank of Kenya (CBK) approval for fintech companies.
Overview of Technology Laws in Kenya
1. The Data Protection Act, 2019
The Data Protection Act regulates the collection, processing, storage, and sharing of personal data in Kenya. It imposes strict requirements on businesses handling personal data. This ensures that consumer information is protected from unnecessary or unauthorized disclosure and misuse.
Key Requirements for Technology Companies
- Registration as a Data Controller or Processor: Businesses handling personal data must register with the Office of the Data Protection Commissioner (ODPC).
- Obtaining Data Subject Consent: Tech Companies must inform the consumers of their products, whose data they collect, about why their data is being collected, how the data will be stored, used and or shared and seek explicit consent before collecting or processing that personal data from its owner, the data subject.
- Notification of Breaches to the ODPC: In the event of a breach of their data, data processors and controllers are required to notify the ODPC and the data subject of the breach among other requirements.
- Cross-Border Data Transfers: Technology companies must ensure that data transferred outside Kenya is protected and in compliance with the country’s privacy standards.
Steps for Compliance
- Appoint a Data Protection Officer (DPO) to oversee compliance.
- Regularly conduct Data Protection Impact Assessments/Audits (DPIAs) to identify risks associated with data collection or processing activities.
- Implement secure data storage, security and encryption mechanisms to protect data breaches.
2. The Computer Misuse and Cybercrimes Act, 2018
Cybersecurity is another major concern for technology companies. To this end, the Computer Misuse and Cybercrimes Act criminalizes several offences such as hacking, identity theft, cyber terrorism, and the unauthorized disclosure of personal data.
Best Practices for Cybersecurity Compliance
- Regular Security Audits: Conduct periodic assessments to identify vulnerabilities and strengthen cybersecurity protocols.
- Multi-Factor Authentication (MFA): Require multiple authentication steps to enhance security for users and employees.
- Incident Reporting: Companies must report cyber incidents to the National Kenya Computer Incident Response Team (KE-CIRT) to mitigate threats and comply with national cybersecurity regulations.
3. Intellectual Property (IP) Protection
Types of IP Protection for Technology Companies
- The Copyright Act: Protects computer software from unlawful copying or distribution, or any other type of unauthorized use.
- The Trademarks Act: Ensures brand identity protection through the registration of unique names, logos, and domain names.
- Patents: Safeguards technological innovations and inventions.
How to Register IP in Kenya
Technology companies can register their intellectual property rights through the Kenya Industrial Property Institute (KIPI). Protecting IP is crucial in preventing infringement and securing business assets.
4. Consumer Protection Act, 2012
The Consumer Protection Act applies to all businesses, including E-Commerce and other types of online businesses. It requires these companies to:
- Provide clear refund and dispute resolution policies.
- Disclose accurate product and service descriptions to consumers.
5. National Payment System Act, 2017
The National Payment System Act regulates fintech companies involved in mobile money, digital lending, and online payments. Companies must:
- Obtain a license from the Central Bank of Kenya (CBK) meeting the requirements under the National Payment Systems Regulations before acquiring that license.
- Comply with Proceeds of Crime and Anti-Money Laundering (POCAMLA)
- Comply with consumer protection policies.
6. Employment Act, of 2007
Ensure that all employment, contractor and independent contractor contracts are in line with the Employment Act where applicable and do not infer a relationship that you do not want to have.
Comply with any other additional requirements related to employees and establish policies on sexual harassment, employee well-being and safety, and employee data protection.
Make sure to also clearly communicate in contracts the intellectual property ownership to safeguard business interests.
Startup Funding and Investor Protection
Startups raising funds through venture capital, angel investors, or crowdfunding must draft clear investment agreements outlining shareholder rights and setting up clear dispute resolution mechanisms.
Taxation of Technology Companies
Taxation Generally
A technology company is subject to taxes based on the type of business entity it is registered as. At the baseline are corporate taxes.
Taxation E-Commerce and Online Businesses
- The Digital Service Tax (DST) requires technology companies offering digital services to pay a 1.5% tax on gross sales to the Kenya Revenue Authority (KRA).
Emerging Trends and Future Legal Developments
The regulatory environment for technology companies is constantly evolving. Some key areas of focus include:
- The Digital Economy Bill aims to streamline digital business regulations.
- AI and Blockchain Regulations are expected to shape the future legal framework for emerging technologies.
Conclusion
Understanding and complying with the above technology company related laws will allow your technology company to operate seamlessly, avoiding unnecessary legal challenges.
We are a team of experienced legal experts with experience in technology law. Reach out to us for specialized, personalized advice and support.