Updated On June 13, 2024: Expanded the article to include two new types of companies – Multinational Corporations (MNCs) and Non-Governmental Organizations (NGOs), along with relevant information about their roles and significance in Kenya’s business landscape.
Are you wondering what type of company you should form? This article is here for your aid. We will discuss the various types of companies in Kenya, as depicted in the constitution.
According to the constitution, any association of more than 20 people should be registered under the Companies Act. The Act provides various types of companies.
Types of Companies in Kenya
Section 389 of the Constitution of Kenya provides four major types of companies, namely:
- Chartered companies
- Statutory companies
- Registered companies
- Public companies
- Private companies
- One person company
- Multinational corporations (MNCs)
- Non-governmental organizations (NGOs)
Below, we will discuss the different types of companies in Kenya.
1. Chartered Companies
A royal charter incorporates a chartered company. Since independence, chartered companies are not being registered in Kenya. An example of a chartered company is the Imperial British East Africa Company.
2. Statutory Companies
A particular act of parliament incorporates statutory companies. The Treasury provides the company’s initial capital.
A statutory company has no shareholders. However, a regulatory company should also make profits and operate under the stated commercial laws.
In case of making losses, the government may come to its aid when in debt. A creditor, however, can not make an application to a court for a statutory company to be dissolved.
Some examples of statutory companies in Kenya include:
- The Railways Company of Kenya
- Kenya Tea Development Agency
- (KPLC) Kenya Pipeline Company
- Kenya Electricity Generating Company (KenGen)
3. Registered Company
The other type of companies in Kenya are registered companies. These types of companies in Kenya are registered under section 2 of the companies act. Registered companies can be further classified into two types according to Sec 4 of the Act.
- Private Companies – Minimum members required are 2.
- Public Companies – the Minimum number of members is 7.
Further to this, a limited/private company may be:
- Limited by guarantee. – A memorandum of association limits the liability of shareholders to the amount contributed to the assets of the company.
- Limited by shares. – A memorandum of the unpaid shares limits shareholders liability.
- Unlimited liability. – no limitation on the liability of its members.
In Kenya, registration of both private/public companies follows the same guidelines.
4. Public Companies
To form a public company, there must be at least seven people. The company does not have any restriction when it comes to the transfer of shares. However, there might be some limitation in its articles of association.
Differences Between a Public and a Private Company
- A public company requires a minimum of seven people to be formed while a private one needs only two people.
- A public company is mainly intended for public and business investment while a private company is designed for trading, business, and other commercial purposes.
- A private company can commence business as soon as it’s incorporated. A public company, however, has to be granted with a certificate of incorporation before starting a business.
- At least three directors are required for a public company, while only two are needed for a private company.
- The Maximum number that a private company can have is 50 members while a public company has no limitation.
- Names of a private company must include privately limited while those of a public company do not have to include public limited.
- Additionally, a private company has a limit to the transfer of shares, while public companies do not have limits.
- A public company may extend an invitation to the public to buy shares while a private company cannot issue a prospectus.
5. Private Company
The company’s Act Section 30(1) defines a private company as one which:
- Limits its members to a maximum of 50 people
- Has a restriction regarding the transfer of shares
- Cannot issue a prospectus to the public
In addition to the above, specific provisions of the employment act do not apply to private companies. These provisions are private company privileges.
Private Company Privileges
- Two active members should be present to form a private company
- A private company does not hold statutory meetings with shareholders
- Copies of financial statements and balance sheet do not have to be inspected by the public.
- A private company’s director does not need to hold a share certificate.
- Overall remuneration guidelines do not also apply to a private company.
6. One Man Companies
In conclusion, there are those companies in which one person holds all the share capital in the company. One type of company is the last type of company in Kenya. This person is, therefore, the largest shareholder and can make all the decisions for the company.
It is worth to, therefore, note that this type of companies is legal and not illegal. A classic example of a one-person company is Saloman vs Saloman & Co. Ltd.
7. Multinational Corporations (MNCs)
Multinational corporations (MNCs) are large companies that operate in multiple countries, including Kenya. These corporations typically have headquarters in one country and subsidiaries or branches in others.
MNCs play a significant role in Kenya’s economy by investing in infrastructure, technology, and human capital, creating employment opportunities, and facilitating international trade and investment.
8. Non-Governmental Organizations (NGOs)
Non-governmental organizations (NGOs) are nonprofit entities that operate independently of the government. In Kenya, NGOs are registered under the Non-Governmental Organizations Coordination Act and are involved in a wide range of activities, including humanitarian aid, social development, environmental conservation, and advocacy. NGOs play a vital role in addressing social issues and promoting positive change in society.
Types Of Companies In Kenya – FAQs
What are the main differences between company types?
The main differences include ownership structure, liability, and regulatory requirements.
How do I register a company in Kenya?
You can register a company online through the eCitizen portal or at the Registrar of Companies.
Are there tax benefits for certain company types?
Yes, different company structures can offer various tax benefits and incentives.
What documents are needed to start a company?
Documents typically include identification, a business name, and the company’s memorandum and articles of association.
Can foreigners own companies in Kenya?
Yes, foreigners can own companies in Kenya, but there may be specific legal requirements and restrictions.
How long does it take to incorporate a company?
The incorporation process usually takes a few days to a few weeks, depending on the completeness of the application and regulatory approvals.
Final Words
Kenya’s business landscape is characterized by a rich tapestry of companies spanning various sectors and industries. From sole proprietorships and partnerships to limited liability companies and multinational corporations, each type of business contributes uniquely to the country’s economic growth and development. By fostering entrepreneurship, innovation, and investment, these companies play a vital role in shaping Kenya’s future prosperity.
Thanks for the document. Though you might want to check out the companies Act 2015, which allows registered companies to be incorporated by one natural person or more.