EUGENE SUDI

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 administrator

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

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

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

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

LEGAL ALERT: ABC’S OF PRENUPTIAL AGREEMENTS IN KENYA

LEGAL ALERT: ABC’S OF PRENUPTIAL AGREEMENTS IN KENYA 150 150 administrator

a. What is Prenuptial Agreement
A Prenuptial Agreement or “Prenup”is a written agreement that establishes the property and financial rights of each spouse in the event of a divorce. It sets out the terms of ownership of assets, how to treat future earnings in a marriage, control of the property of each and how the property will be divided in case of divorce.
b. Necessity
1. The divorce rate in our country has been rising steadily over the past 3 decades so divorce is now an acceptable reality.
2. Many people enter marriage with some debt, and their partners may want to protect themselves from those financial problems if the marriage ends.
3. Increased number of financially independent women who may want to protect their financial interest in a marriage.
4. Most people view a Prenup as a bet against the success of the marriage. But marriage is a contract and a Prenup is simply a way of putting guidelines on that contract.
c. Legal Backing
1. Article 40(1)(b) of the Constitution of Kenya, 2010 (the Constitution) provides for the right to own property in any part of Kenya either individually or in association with others.
2. Section 6 (3) of the Kenyan Matrimonial Property Act provides that parties to an intended marriage may enter into an agreement before their marriage to determine their property rights whereby a prenuptial agreement takes precedence over other principles of subdividing matrimonial property.

d. Validity of a Prenuptial Agreement
1. The agreement must be freely entered into.
2. The parties must have a full appreciation of the implications of the agreement.
3. It must not be unfair to hold the parties to their agreement in the circumstances prevailing.
4. Must be signed before the formalization of the marriage.
e. What should a Prenup Cover
A prenuptial agreement is most important when it comes to protecting pre-marital financial interests, such as retirement, investment funds, property and other finances and most importantly debts. It should also cover how sentimental items should be handled because these have strong emotional triggers that can often become the focal point of messy divorces.
f. Courts power to set aside a Prenup
Section 6 (4) of the Matrimonial Properties Act gives courts the power to set aside this agreements if it is proven that it was influenced by fraud, coercion or is manifestly unjust.
BY Eugene SUDI

LEGAL ALERT :EXTENSION OF PARENTAL RESPONSIBILITY

LEGAL ALERT :EXTENSION OF PARENTAL RESPONSIBILITY 150 150 administrator

Did you know that an order for extension of parental responsibility, in regards to payment of fees, can be issued to a person who has attained the age of 18 years where the training/school he has enrolled for has not ended, the High Court in Civil Appeal 34 of 2017 stated in summary that despite a person attaining the age of majority which is 18 years and at that time has neither completed his education nor gotten gainful employment then the parents having set high standards for their children, have a responsibility to promote their social progress and better standards of life for them especially children who are willing and who are self-driven .It is against the child’s right to education for a parent to discontinue their education prematurely on account of them being adults.

LEGAL ALERT:Employees wooed by Kshs. 9,000 monthly tax relief under the Affordable Housing Programme

LEGAL ALERT:Employees wooed by Kshs. 9,000 monthly tax relief under the Affordable Housing Programme 150 150 administrator

The Affordable Housing Programme (AHP) has been in the list of president Uhuru’s Big 4 Agenda. The said programme seeks to provide affordable housing for Kenyans in the low and middle income segment.The programme launched in January, 2019 seeks to roll out 500,000 units by 2022 to try and plug the housing gap in the country.
To spur uptake and interest in the programme, the Government of Kenya through an amendment to Finance Act 2019 and the schedules therein has provided a tax relief to employees that will allow them a tax relief of 15% of gross contributions capped to KSh. 108,000 per year or KSh. 9,000 per month of their income. Employers will be allowed to reduce their employees’ Pay As You Earn (PAYE) payable by 15% of the gross contributions to the Affordable Housing Scheme and this relief will be termed as Affordable Housing Relief. For instance, a person earning Kshs. 90,000 a month is currently liable to pay KRA Kshs. 20,740 but under the housing incentive plan, their income tax would reduce to Ksh11, 740.

The Kenya Revenue Authority (KRA) will be required to issue details on tax relief to employers. Technically, saving into the housing fund has become voluntary as only workers who will have registered for the programme will enjoy the relief.

Initial plans to force employers to deduct the equivalent of 1.5 per cent of workers’ pay to the housing fund mandatorily were dashed by the courts which ruled that the proposal was illegal.

By Eugene Sudi

LEGAL ALERT: Turnover Tax

LEGAL ALERT: Turnover Tax 150 150 administrator

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.

Trademark Registration in Kenya

Trademark Registration in Kenya administrator

The registration of a trademark under our current legislative regime gives the you the exclusive right to the use of the trademark upon or in relation to the goods in respect of which it is registered, or in relation to services for the purpose of indicating that a particular person is connected, in the course of business, with the provision of those services.  It follows that you, as the proprietor of the mark may sue for infringement where there has been an unauthorized use of the registered mark. In addition, you, as the registered owner of a trademark also retain the right to protect any reputation acquired through use of the trademark by means of a passing-off action.

Briefly, the procedure for registration of a trademark is as follows:

  • A preliminary search is conducted to determine whether the mark is available for registration;
  • If the mark is available for registration, an application is made, in the prescribed form, for the registration of the same. The mark will then be examined by the registrar to determine whether it meets the statutory criteria for registration;
  • After examination of the application, the registrar may refuse it, or accept it absolutely or subject to such amendments, disclaimers, modifications, conditions or limitations, if any, as he may think right to impose;
  • If the registrar objects to the application, he must inform the applicant of his refusal to do so;
  • As soon as possible after an application for registration of a trademark has been accepted, the registrar must cause the application as accepted to be advertised in the Kenya Gazette, and the advertisement must set forth all conditions and limitations subject to which the application has been accepted;
  • Within sixty (60) days from the date of any advertisement of an application to register a trade mark, any person may give the registrar notice of opposition to the registration;
  • Subject to whether there is an opposition to the registration, the registrar will, as soon as possible after the expiration of sixty days from the date of the advertisement, enter the trademark in the register and issue a certificate of registration of the mark to the applicant. The registration of a trade mark shall be for a period of seven years, but may be renewed from time to time after the expiry of such period.

 

The registration of the trademark will take a total of 3-5 months this takes a long time due to the statutory period for the advertisement.

 

Written by:

Eugene Mweresa Sudi

Advocate

TERMINATION OF EMPLOYMENT ON ACCOUNT OF REDUNDANCY

TERMINATION OF EMPLOYMENT ON ACCOUNT OF REDUNDANCY administrator

Redundancy means loss of employment, occupation, job or career by involuntary means through no fault of an employee. It involves termination of employment at the initiative of the employer.

Redundancy is defined under Section 2 of the Employment Act, 2007 as the loss of employment, occupation, job or career by involuntary means through no fault of an employee. It involves termination of employment at the initiative of the employer, where the services of an employee are superfluous. Redundancy may arise under various circumstances including but not limited to the practices commonly known as abolition of office, job or occupation and loss of employment.

Circumstances in which redundancy may include:

  • When a company is downsizing
  • When a company is restructuring
  • Reduction in staff requirements due to inefficiency gains or falling demand.

Law Applicable

Section 40(1) of the Employment Act provides for the substantive and procedural legal requirements that an Employer needs to comply with while effecting a termination on account of redundancy, it provides as follows:

 “An employer shall not terminate a contract of service on account of redundancy unless the employer complies with the following conditions:-

  1. where the employee is a member of a trade union, the employer notifies the union to which the employee is a member and the labour officer in charge of the area where the employee is employed of the reasons for, and the extent of, the intended redundancy not less than a month prior to the date of the intended date of termination on account of redundancy;
  2. where an employee is not a member of a trade union, the employer notifies the employee personally in writing and the labour officer;
  3. the employer has, in the selection of employees to be declared redundant had due regard to seniority in time and to the skill, ability and reliability of each employee of the particular class of employees affected by the redundancy;
  4. where there is in existence a collective agreement between an employer and a trade union setting out terminal benefits payable upon redundancy; the employer has not placed the employee at a disadvantage for being or not being a member of the trade union;
  5. the employer has where leave is due to an employee who is declared redundant, paid off the leave in cash;
  6. the employer has paid an employee declared redundant not less than one month’s notice or one month’s wages in lieu of notice; and
  7. the employer has paid to an employee declared redundant severance pay at the rate of not less than fifteen days pay for each completed year of service

For a termination on account of redundancy to be fair and lawful, an employer must adhere to the requirements set out in Section 40(1) of the Employment Act, 2007, unless the parties have entered into an agreement to the contrary with terms greater than the minimum statutory requirements which may be through a contract of employment or Collective Bargaining Agreement (CBA).

Eugene Mweresa Sudi

Advocate

PROTECTION AGAINST DOMESTIC VIOLENCE

PROTECTION AGAINST DOMESTIC VIOLENCE administrator

 

DOMESTIC VIOLONCE

PROTECTION  AGAINST DOMESTIC VIOLENCE

Kenya has witnessed an unprecedented rise in cases of domestic violence some unfortunately ending tragically with death. Many Kenyans unfortunately unaware that there is a law that specifically protects individuals from domestic violence namely the Protection Against Domestic Violence Act of 2015.

The act defines domestic violence as violence against a person, or threat of violence or of imminent danger to that person, by any other person with whom that person is, or has been, in a domestic relationship. The genius of the act is that it broadens the meaning of the word domestic relationship from the commonly accepted interpretation of a couple to include persons who have been previously been married, persons living in the same household, persons who are divorced, persons who are family members, persons who are engaged, persons who have children with each other and persons who have a close personal relationship.

The act goes further to define violence to include the following:

  1. Abuse that includes child marriage, female genital mutilation, forced marriage, forced wife inheritance, interference from in-laws, sexual violence within marriage, virginity testing and widow cleansing;
  2. damage to property;
  3. defilement;
  4. depriving an individual or hindering an individual from access to reasonable share of the facilities associated with the individuals place of residence;
  5. economic abuse;
  6. emotional or psychological abuse;
  7. forcible entry into an individual’s residence where the parties do not share the same residence;
  8. harassment;
  9. incest;
  10. intimidation
  11. physical abuse;
  12. sexual abuse;
  13. stalking;
  14. verbal abuse; or
  15. any other conduct against a person, where such conduct harms or may cause imminent harm to the safety, health, or well-being of the person.

The act does not only protect you from actual infliction of the violence described above but also protects you in instances where you fear or there is imminent threat that that the violence above will be inflicted on you.

The Act has encompassed the new forms of violence and abuse that have arisen with the emergence of social media as long as the perpetrator is person with whom you have a close personal relationship. Such forms of violence include emotional abuse, psychological abuse, harassment, intimidation, stalking, verbal abuse and any other conduct against you that may cause imminent harm to your safety, health or well being.

 

 

Where there is domestic violence or where there is imminent threat of domestic violence as described above in any domestic relationship. The act gives you the power to apply for a protection order from court. A protection will among other things direct an aggressor, not do any one or more of the following actions against you:

  1. physically or sexually abuse or threaten to abuse you;
  2. damage, or threaten to damage, any your property;
  3. engage, or threaten to engage, in behaviour including intimidation or harassment, which amounts to psychological abuse against you;
  4. encourage any person to engage in behaviour against you where the behaviour, if engaged in by the aggressor would be prohibited by the order;
  5. engage, or threaten to engage, in behaviour including intimidation, harassment or stalking which amounts to emotional, verbal or psychological abuse against you;
  6. engage, or threaten to engage, in economic abuse against you; or
  7. engage, or threaten to engage, in cultural or customary rites or practices that abuse your person.

An aggressor who has been served with a copy of  a protection order  and who contravenes the order commits an offence and is liable to a fine not exceeding one hundred thousand shillings, or to imprisonment for a period not exceeding twelve months, or to both.

The act further provides that where one suffers personal injuries or damage to property or financial loss as a result of the domestic violence, A court may ward compensation in respect of the injury or damage or loss where it deems just and reasonable.

The coming into force of the Act has hailed a new era in how we deal and react to acts of domestic violence against us be it in person or on social media. With the coming into force of this act you should not feel like you are living in hell from one day to the next. That there is nothing you can do to escape. That you don’t know where you would go if you acted. That you are utterly powerless, and that feeling is your prison.

We, as peaceful and loving citizens should at all instances stand up and condemn all instances of domestic violence, because domestic violence is raw and if unleashed has the capacity of tearing away the veil of civilization that keeps us sane.  “In a healthy relationship, vulnerability is wonderful. It leads to increased intimacy and closer bonds. When a healthy person realizes that he or she hurt you, they feel remorse and they make amends. It’s safe to be honest. In an abusive system, vulnerability is dangerous. It’s considered a weakness, which acts as an invitation for more mistreatment. Abusive people feel a surge of power when they discover a weakness. They exploit it, using it to gain more power. Crying or complaining confirms that they’ve poked you in the right spot”― Christina Enevoldsen,

STAND UP AGAINST DOMESTIC VIOLENCE THE POWER IS WITHIN YOU

Eugene Sudi

Sudi & Associates.

Trade Secrets in Kenya: A case for Small & Medium Enterprises

Trade Secrets in Kenya: A case for Small & Medium Enterprises 150 150 administrator

trade secret
It is evident that the Kenyan economy is being driven by the SME sector. The hosting of the Global Entrepreneurship Summit by Kenya and the rush by investors, banks included to inject billions of shillings into the SME sector is a testament that Kenya is indeed a hotbed for opportunities. The growth of the Kenyan SME sector is characterized by entrepreneurs who are innovative, wildly creative, and ambitious with a burning urge, need and desire to always push boundaries. These breed of entrepreneurs is always willing to wander into uncharted territories with an aim of breaking set societal ceilings.
The characteristics of the drivers of the Kenyan SME sector has given rise to countless innovations that give their respective business a competitive edge against their competitors. It is thus becoming necessary for SMEs to implement appropriate intellectual property management strategies to protect their trade secrets.
Trade secrets include sales methods, distribution methods, consumer profiles, advertising strategies, lists of suppliers and clients, manufacturing processes e.t.c. Broadly speaking, any confidential business information which gives an enterprise a competitive edge may be considered a trade secret and where the unauthorized use of such information by persons other than the holder is regarded as an unfair practice and a violation of the trade secret and includes industrial or commercial espionage, breach of contract and breach of confidence. Due to the fact that constant innovation is the only distinguishing factor amongst the SMEs, protection of trade should thus follows as a mandatory measure. It is only through innovations that SMEs can expand their capacity, generate capital investments, increase productivity, advance technologically and increase their overall market share.
Contrary to patents, trade secrets are protected without registration, that is, trade secrets are protected without any procedural formalities. Consequently, a trade secret can be protected for an unlimited period of time. For these reasons, the protection of trade secrets may appear to be particularly attractive for SMEs. However for some information to be considered a trade secret it must comply with the following requirements referred to in Art. 39 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) which Kenya is a party to:
• The information must be secret (i.e. it is not generally known among, or readily accessible to, circles that normally deal with the kind of information in question).
• It must have commercial value because it is a secret.
• It must have been subject to reasonable steps by the rightful holder of the information to keep it secret (e.g., through confidentiality agreements).
SMEs should rely on trade secrets for the protection of their intellectual property due to the following reasons:
• Trade is not limited to time and thus operates indefinitely as long as the secret is not revealed to the public.
• Trade secrets involve no registration costs apart from the costs of preparing the various documentation that protects the secret.
• Trade secrets have immediate effect as opposed to the patenting process which takes about 2 years in Kenya.
• Trade secret protection does not require compliance with government regulations apart from formalities of contract law.
• Where a secret is not patentable then a protection as a trade secret is appropriate.
• Broad range of protectable subject matter
• Applies to innovations that are in the conception stage
• May be used in combination with other IP protection mechanisms to protect complex inventions Unlimited
• Assists in appropriating returns to innovation investment
• Assists in arranging for financing of further commercial development
• Availability of legal remedies in cases of breach.
Some of the strategies that can be used by SMEs to protect their trade secrets include:
• If a secret is patentable then organizations should consider whether they should patent them
• Ensure that only few high level executives have access to trade secrets and ensure that even the access to this special group is highly controlled.
• Use of confidentiality and non disclosure agreements with employees and business partners where such people come into contact with any confidential information.
For any SMEs that may want to adopt the use of trade secrets, it is always important to have the following as your standard checklist:
• Identify and catalogue your trade secrets.
• Put in place physical, technical, and contractual measures for protecting your trade secrets.
• Document trade secret protection measures you take as a reference tool in case of disputes.
• Develop and implement a trade secret protection policy and sensitize all employees on the provisions of this policy.
• Always have non-disclosure agreements (NDAs) before entering negotiations with third parties.
Written by,
Eugene Sudi
Managing Partner
SUDI & ASSOCIATES