PROCEDURE FOR INCORPORATING A LIMITED COMPANY

Part II of the Companies Act outlines the procedure for registering a company. The following five steps must be followed;

                    -          Reservation of name

                    -          Preparation of memorandum and article of association

                    -          Preparation of statutory forms

                    -          Presentation of the documents

                    -          Registration and issuance of the certificate of incorporation

                  1.  Name search and reservation

The promoters must choose a suitable name and  conduct a search to ascertain the availability of the name. It is advisable to search at least three names simultaneously to save time. The search costs Kshs. 100 per name. After the search, an application should be made to the Registrar for the reservation of the name. The name must not be in initials.  The Registrar will scrutinize the name(s) and if satisfied that the name is suitable, the Registrar will reserve it for a period of 30 days. This period can be extended for 30 days. During the reservation period, no other company may be registered by that name.

The word ‘limited’ should be the last word of the name.  However, the use of the word can be dispensed with by the minister where the company about to be formed is for promoting commerce, art, science, religion, charity or any useful object and intends to apply its profits in promoting its objects and prohibits the payment of dividends to its members.

                2.  Preparation of memorandum and articles of association

The next stage is the preparation memorandum and articles of association.     

                   a)      Memorandum of association

The memorandum of association is a charter which defines the limitations of the company to be established under the Act. It is a document that governs the relationship between the company and the outside. The memorandum should be written in the English language, printed and should contain the following clauses–

i)            Name clause -  this states the name of the company with the word ‘limited’ as the last word;

ii)           Registered office clause - “the registered office of the company will be situate in Kenya’

iii)        Object clause – this clause is very important and must be carefully drafted. It determines the activities of the company. Each and every activity of the business to be carried out must therefore be laid down. This clause may contain other sub-clause namely; main objects, objects incidental or ancillary, other objects;

iv)      Liability clause – this states the nature of the liability of the members e.g. “the liability of the members is limited”

v)        Capital clause – states the amount of capital with which the company is to be registered and how it is divided.

vi)       Association clause; this states that the subscribers declare that they desire to be formed into a company and agree to take the shares stated against their names.

Each subscriber should sign the memorandum. Each subscriber should also provide his full name, occupation, address, national Identity number and the KRA PIN number beside the signature. The signatures must be witnessed by at least two witnesses. 

see sample memorandum of association

          b)  Articles of association

Articles of association contain the rules relating to the management of internal affairs of a company. It provides for the rights, duties and powers of members, directors and general meeting of members.

A company may adopt all or any part of the regulations contained in Table A of the First Schedule to the Act. The articles should be written in English, divided into paragraphs, numbered consecutively, dated and signed by each subscriber. They must be attested by a witness who must state the occupation and postal address.

       3.   Preparation of statutory forms

The memorandum and article of association must be accompanied by the following statutory forms:

                    a)      Statement of nominal capital

                    b)      Particulars of directors and secretary (Form 203)

                    c)      Notice of situation of registered office (Form 201)

                    d)     Declaration of compliance (Form 208)

The statement of particulars of Directors and Secretary (Form 203) should contain the following information with respect to the directors; name, nationality, postal address, business occupation, other directorship held by him (if any), and the date of birth.

With regard to the secretary, the statement should contain; name and postal address. The statement is provided in which must be filled by an advocate or a certified public secretary.

The statutory declaration of compliance (Form 208) is a declaration that all the requirements of the Companies Act in respect of matters precedent to the registration of the company have been complied with. The declaration is made by an advocate engaged in the formation of the company, or by a person named in the articles as a director or secretary of the company. The statutory declaration must be commissioned.

The notice of situation of registered office (Form 201) is filled by a director. It notifies the Registrar of the physical location and postal address of the registered office.

The statement of nominal capital outlines the company’s nominal capital. It is important for computing the amount of stamp duty payable. It is first lodged to the collector of stamp duty. Once the stamp duty is paid, all the document should be made ready for presentation to Companies Registry.

            4.  Presentation of documents

The documents should then be lodged at the companies registry. The memorandum and articles of association should be in three copies. The documents are then delivered to the Registrar for registration. The registrar will compute the registration fees payable.

           5.   Registration and certificate of incorporation

Once the Registrar is satisfied that all registration requirements have been met and that the purpose for which the incorporators are associated is lawful, the Registrar will issue a certificate of incorporation signed by him or issued under the official seal.

The certificate of incorporation is conclusive evidence that all the requirements of the Act in respect of registration have been complied with. Further, from the date of incorporation mentioned in the certificate, the subscribers to the memorandum become a body corporate.

It should be noted that the incorporation of a company must be undertaken by a qualified advocate. The law prohibits unqualified persons from taking instructions or drawing any document or instrument for, or in relation to the formation of any limited liability company.