Introduction

A company incorporated outside Kenya may conduct business in Kenya by registering a branch with the Registrar of Companies. The Companies Act, 2015 (the Act) requires a foreign company seeking registration in Kenya to appoint at least one local representative who must reside in Kenya. The local representative is not required to hold shares in the foreign company.

The local representative is a statutory role whose responsibilities extend beyond being a local contact.

Key Roles

Pursuant to Section 981 of the Act, a local representative is responsible and primarily answerable for complying with the Act on behalf of the foreign company. This includes ensuring all requisite filings to the Registrar of Companies are made and keeping the registered office in Kenya open during business hours for delivery of communications and notices.

In addition, the local representative serves as the primary contact between the foreign company, Kenyan government agencies and the general public. Actions by the local representative are binding on the foreign company and the local representative can receive legal process on behalf of the company. These roles mean anyone accepting to be appointed as a local representative must ensure they are properly enabled by the foreign company to carry out their duties.

The Act allows for appointment of more than one local representative, each of whom will be jointly and severally answerable for all matters required of a foreign company under the Act.

Personal Liability

The Act provides that the local representative is personally liable for any penalties imposed on the foreign company due to non-compliance with the Act. However, based on the High Court decision in Malebe v DPP[i]i it appears, liability is limited to compliance matters. The local representative is only liable for all other breaches of the law by the company, if they participated in the illegal act or failed to take reasonable steps to stop it.

The Malebe Case was premised on the role of an authorised person under the repealed Companies Act. That role is similar to that of the local representative under the Act, but with more responsibilities beyond just receiving legal process on behalf of the foreign company.   

Liability for Tax Obligations

Under the Tax Procedures Act, 2015 (TPA) the definition of a company includes foreign companies registered under the Companies Act. The TPA provides that tax representative in the case of a company include its CEO, managing director, company secretary, treasurer, trustee, a resident director or similar officer of the company acting or purporting to act in such position.

The TPA has not expressly listed local representatives as recognised tax representatives of a company. However, the wording ‘or similar officer of the company’ provides a basis for a local representative to be deemed a tax representative.  In addition, the Tax Appeal Tribunal’s decision in the Naivas Case[ii] has provided a broad stroke by which one can become a tax representative of corporate entities.

This means beyond handling compliance under the Act, a local representative can be liable for tax matters of a foreign company. The TPA however limits personal liability of tax representatives to instances where they have disposed of funds in their possession, which could have been utilized to settle unpaid taxes. However, this personal liability may be extended where the local representative while in custody of the assets of the foreign company fails to pay taxes due which they know or reasonably ought to have known was due.

Therefore, it would be in the best interest of a local representative to be fully aware of the goings-on at the company they represent. They should also obtain sufficient information and where possible, officers’ liability insurance.

Conclusion

Appointing a local representative is a critical step for foreign companies looking to establish a presence in Kenya. It helps ensure both legal compliance and effective communication with local authorities. Individuals accepting appointments as local representatives should seek legal advice to appreciate and understand the legal framework and potential risks. The risks include personal liability for the foreign company’s non-compliance with legal, regulatory and tax obligations.

 

DISCLAIMER:

This briefing highlights legislative and policy changes for general use only. It does not create an advocate-client relationship between the sender and the receiver or reader. It is not legal advice or opinion. You should not act or rely on this briefing without first consulting an advocate.

[i] Richard Malebe v Director of Public Prosecutions & 2 others [2020] eKLR

[ii] Naivas Kenya Limited V Commissioner Of Domestic Taxes (Tax Appeal 934 Of 2022) [2023] KETAT 499 (KLR)