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
- One man company
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
Statutory companies are incorporated by a special act of parliament. The company’s initial capital is provided by the treasury.
A statutory company has no shareholders. However, a statutory 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 2 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
In order to form a public company, there must be at least seven people. The company does not have any restriction when it comes to 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 requires only 2 people.
- A public company is mainly intended for public and business investment while a private company is intended 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 commencing 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, there are certain provisions of the employment act that do not apply to private companies. These provisions are private company privileges.
Private Company Privileges
- 2 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.
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-man company is Saloman vs Saloman & Co. Ltd.