CORPORATE LAW

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LEGAL ALERT: Digital lenders on the cusp of coming under CBK’s radar with the proposed amendments to the CBK Act.
LEGAL ALERT: Digital lenders on the cusp of coming under CBK’s radar with the proposed amendments to the CBK Act. 150 150 Admin_salclaw

The Central Bank of Kenya (Amendment) Bill 2020 is currently before the National Assembly’s finance committee, with the public participation stage having ended on 11th August 2020. After that, the finance committee will report to the house sitting in plenary on their consideration of the Bill before members of Parliament brace themselves for debating and voting on the same. The Bill aims to arrest the excessive digital lending rates that have entrapped many borrowers and to tame predatory lending. Further, the Bill aims to bring some sanity to the digital lending marketplace as there have been several complaints by members of the public over the unorthodox and humiliating tactics lenders use to pursue debt payment. For example, some lenders contact close family members of the debtors incessantly for them to appeal to the debtors to settle their debt.

A survey conducted by the Star newspaper in 2019 regarding interests charged by some digital lenders in Kenya revealed that a majority of them were charging interest rates as high as 15 percent per month, which translates to an Annual Pricing Rate of 180 percent. This figure is 15 times more than what commercial Banks charge for unsecured loans, with the present average rate being 11.95 percent, according to CBK.

If the Bill is passed, digital lenders will require CBK’s approval to vary their interest rates and to introduce new loan products. While digital lenders do not oppose the idea of regulation, some of them are however, against strict supervision by the CBK as they are not deposit-taking institutions like banks.  Instead, digital lenders consider regulation under the Microfinance Act as a more rational and suitable approach as this law caters for non-deposit taking microfinance institutions.  They also hold that regulation under the Microfinance Act will ensure that digital lenders maintain flexibility in the innovation of loan products as CBK approval will not be required.

 

Written by Edward O. Sudi

edwardsudi@salclaw.co.ke

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LEGAL ALERT: PAYMENT OF STAMP DUTY AND CAPITAL GAINS TAX
LEGAL ALERT: PAYMENT OF STAMP DUTY AND CAPITAL GAINS TAX 150 150 Admin_salclaw

The Kenya Revenue Authority, has informed the public that it is in the process of simplifying the Stamp Duty payment process on land transactions on the Itax System and thereby expediting the payment process.

 

Following the changes, it will no  longer be conditional to present a Capital Gains Acknowledgement Slip before stamp duty payment is processed, as had been the case before. This reform is expected to improve the ease of doing business by creating efficiency in the process and promoting investments.

 

TAKE NOTE that transfer of property still attracts Capital Gains Tax which is payable by the transferor on or before the 20th day of the following month in which the transfer is effected.

 

Be advised accordingly

 

SUDI & ASSOCIATES

www.salclaw.co.ke

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LEGAL ALERT: IMPACT OF CORONA VIRUS ON BUSINESS CONTRACTS-FORCE MAJEURE
LEGAL ALERT: IMPACT OF CORONA VIRUS ON BUSINESS CONTRACTS-FORCE MAJEURE 150 150 Admin_salclaw

Overview
The outbreak of Coronavirus is impacting global markets, trade and commerce. Quarantine and travel measures have begun to impact local businesses and the supply chains supporting them. Many businesses may thus seek to rely on force majeure clauses or other contractual rights for relief from the performance of certain obligations due to the impact of the Coronavirus outbreak.
What is force Majeure
Force majeure refers to a clause that is included in contracts to remove liability for natural and unavoidable catastrophes like war, natural disasters, terrorist attacks Etc that interrupt the expected course of events and restricts parties from fulfilling their obligations under the said contracts.
What does your force majeure clause actually say?
There is no single “standard” force majeure clause. Just because your business may include force majeure clauses in its contracts does not mean they are necessarily all uniform. Since the virus is a relatively new phenomenon, it is unlikely that any force majeure clauses would explicitly refer to the event of a Coronavirus outbreak. Thus the party relying on the clause will still likely need to prove that the force majeure event was not “reasonably contemplated” by the parties when making the contract, and that the event is “beyond the reasonable control” of the party seeking relief.
How can you seek / prevent relief for force majeure?
The onus is on the party seeking to rely on the force majeure clause to prove that the force majeure event has prevented, hindered, delayed or affected the performance of the contract. Generally, if a force majeure event occurs, performance of certain obligations within the contract will be suspended for a specified period of time (for example, until the Coronavirus outbreak is contained or its consequences on the contract parties come to an end). In some cases, a suspension of obligations may not be viable and parties may seek to terminate the contract entirely.
Is notice required?
Force majeure clauses vary in their notice requirements. Some require notice within a certain timeframe of the occurrence of an event of force majeure, whereas others only require prompt or “reasonably” prompt notice. In the context of the coronavirus pandemic, is notice required upon WHO’s declaration the coronavirus outbreak a pandemic? Was it when a travel ban was entered? Was it when a local lock down measures were enacted?
What if there is no force majeure clause?
If there is no force majeure clause one can rely on the doctrine of frustration which means that events beyond their control may occur which frustrate the purpose of their agreement, or render it very difficult or impossible, or as even illegal, to perform obligations under a contract.
Understanding Your Contract
Be sure to fully understand what the contract requires for one declare a force majeure event. Many force majeure provisions include procedural requirements the claiming party must abide by in order to effectively enforce the provision, including notice requirements.

By Eugene Sudi
SUDI & ASSOCIATES
sudi@salclaw.co.ke

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LEGAL ALERT: Turnover Tax
LEGAL ALERT: Turnover Tax 150 150 Admin_salclaw

Turnover Tax
In accordance with the Finance Act, 2019, the Turnover Tax (TOT) has been re-introduced and will be payable from 1st January 2020.

Who should pay TOT?
Turnover Tax (TOT) is payable by any resident person whose turnover from business does not exceed or is not expected to exceed Kshs 5,000,000 during any year of income.

TOT does not apply to:

Persons registered for VAT
Persons with business income of Kshs 5,000,000 and above,
Employment Income,
Rental Income,
Limited Liability Companies,
Management and Professional Services among others.

What is the rate for Turnover Tax (TOT)?
The tax rate for TOT is 3% on the gross sales/turnover and is a final tax.

Filing of TOT Returns
TOT will be filed and paid on a monthly basis. The due date is on or before 20th of the following month.

Note
TOT payers are also liable to pay Presumptive Tax at a rate of 15% of the Single Business Permit fee payable or licence payable. However, Presumptive Tax paid will be offset against the TOT payable.

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