Introduction
The principal or commonly prepared
securities that require registration at the Companies registry are the
Debenture and Chattels Mortgage.
1.
Debenture
The Companies Act (Cap 486) of the laws
of Kenya provides the legal regime for the registration of debentures and the
issuance of a Certificate as evidence of the said registration.
The issuing of a debenture by a company
is done pursuant to powers conferred to the company by its Memorandum and
Articles of Association. In practice in addition to the said powers a
resolution by the Board of Directors of the company allowing creation of the
debenture will be prepared and executed by the directors of the company.
The procedure for registering a
debenture is as follows: -
a.
Conducting of a search
on the company file at the Companies Registry to ascertain the existence of the
company together with information that is pertinent to the creation of a
debenture such as establishing that the provisions of the Memorandum and Articles
of Association of the company empower it to create a debenture.
b.
Drawing up of the
Instrument of debenture
c.
Execution of the
debenture. The Companies Act provides for execution of the debenture by
appending of the company seal which is to be witnessed by the signatures of two
directors of the company or one director of the company and its company
secretary. Execution of the debenture by the financier is not a mandatory
requirement
d.
Assessment of Debenture
to stamp duty and payment of assessed stamp duty. Assessment of a debenture to
determine the stamp duty payable to the Kenya Revenue Authority is done at the
Companies Registry. Presently stamp duty payable has been lowered from 0.2% to
0.1% of the sum secured. This change came into effect following the budget
speech read in June 2010. In order to
assess a document to stamp duty there is need to have the Personal
Identification Numbers (PINs) of the parties to the transaction (in the case of
a debenture the PIN of the lender and the borrower). A PIN is issued by the
Kenya Revenue Authority. After assessment of payable duty payment of the tax is
made at specified banks which remit details of the payment to the Companies
Registry to facilitate the stamping of the debenture instrument.
e.
Lodging of the
debenture with the Registrar of Companies for stamping. The Instrument of Debenture is then presented
at the registry where an endorsement is made on its first page signifying the
payment of duty.
f.
Lodging the debenture
at the Companies Registry for registration upon making payment, usually a
standard fee.
g.
Issuance of a
certificate as evidence of the creation of a debenture.
2.
Chattels Mortgage
The creation of Chattels Mortgage is
governed by the Chattels Transfer Act (Cap 28) of the Laws of Kenya. The
creation of Chattels Mortgages in Kenya is largely restricted to securities
owned by individuals. In this regard, companies are considered to be adequately
served by securities arising from debentures and other forms of Charges
provided for in the Companies Act.
Registration procedure for a Chattel
Mortgage:
a.
Where the chattels over
which a chattels mortgage is created are registered at a public registry such
as is the case with motor vehicles then prior to the preparation of a Chattels
Mortgage a search relating to the asset is conducted at the relevant registry
to ascertain its existence and other pertinent matters that may affect the
security.
b.
Drawing up and
execution of the Chattels Mortgage instrument.
c.
Assessment of the
Chattels Mortgage to stamp duty and payment of assessed stamp duty. Presently
stamp duty payable has been lowered from 0.2% to 0.1% of sum secured.
d.
Lodging of the Chattels
Mortgage with the Registrar of Companies for stamping.
e.
Lodging of the Chattels
Mortgage at the Companies registry for registration upon payment of a standard
fee.
