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"id": 45833,
"url": "https://info.mzalendo.com/api/v0.1/hansard/entries/45833/?format=api",
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"type": "speech",
"speaker_name": "Mr. M. Kilonzo",
"speaker_title": "The Minister for Justice, National Cohesion and Constitutional Affairs",
"speaker": {
"id": 47,
"legal_name": "Mutula Kilonzo",
"slug": "mutula-kilonzo"
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"content": "Mr. Temporary Deputy Speaker, Sir, if you gave the English the English Companies Act of 1948 that the hon. Attorney-General has referred to today, they will reject it because it is archaic law. They revised it in 1970. They have revised it even further since the establishment of the European Union. Therefore, our time has come. My only disappointment is that it has taken so long to bring it. Mr. Temporary Deputy Speaker, Sir, allow me without anticipating debate, to recommend very seriously the next Bill which will be the insolvency law because they go together. Can you imagine, over all these years since 1948, we have had a company law that combined registration of companies and their management, including auditing and at the same time, it is also the one which covered such things like insolvency and so on? The Vision 2030 that this country has embraced over a number of years is encouraging us to look forward and to stop looking behind us and using archaic practices. One of the most beautiful attractions of this law is the challenge that this country is facing on employment. I want to say this without fear that the foreign direct investments in the world, is only attracted by quality company legislation. It is only attracted by quality political management systems as envisaged by the new Constitution. Therefore, if this country wants to compete with the rest of the African countries and, for that matter, Asian tigers and even European countries from the old Russian bloc, the timing of this law is very essential. The sooner we pass it, the better. Mr. Temporary Deputy Speaker, Sir, whichever investor brings money into Kenya, automatically by investing, they start creating employment by recruitment of secretaries or hiring lawyers to prepare the contracts or even buying toilet papers for the toilets because all human beings must go to the loo. This is an essential part of revenue increase. I want to remind the country that under Article 203 of the Constitution, we have assigned 15 per cent of annual revenue to counties. Therefore, the sooner we bring forth quality law even before we pass the law on the management of counties--- It is very important we realize that even if you prescribe 15 per cent of revenue to counties, but you do not open up global trade for Kenya by attracting people to our legal infrastructure on companies, then devolution will become just that, a word appearing in our Constitution. For the benefit of those who are interested will be the law that will enable companies that want to do tourism, banking, insurance, to invest in agriculture, fishing, mining, exploration in oil, taking contracts for construction of our infrastructure and, above all, even areas like the film industry. Therefore, the timing of the law is very good. I would like also to mention that in the modern world, an investor in California today only needs to go on the internet to check the legal regime in Kenya. I want to tell you without fear that any lawyer advising an American who wants to invest in Kenya will tell him outright that the law of companies in Kenya is that of the last century. In fact, it is of the 19th century because that is where the British got the 1948 law. Allow me also to mention another mischief that the Attorney-General has not mentioned. This is the miasma of dirt that has accompanied land-buying companies in this country. People who go out there, they start land-buying companies, they fleece the shareholders; they mistreat them; they steal from them; they go and live wonderful lives, but in the end, the shareholders are limited to court cases that run forever. One of the most attractive aspects of this law is the power given to courts under Clause No.478 to order an inspection of a company and an investigation, so long as an application is made by shareholders. Kenyans are tired of being cheated, particularly by land-buying companies and the like whose cases when you see them in the Press are only useful to Kenyans for enabling newspaper companies to sell those newspapers, but not for the investment that the shareholders thought they were making. Recently, this country has also been very badly hurt by the pyramid schemes, otherwise internationally known as ponzi schemes. This law that is on the Table will be a cure for those thieves and people attracted to taking investorsâ money. The pyramid schemes of Kenya even stole money from worshippers. They were organized to collect money from people who were going in good faith to churches. They were organized by people who were taking advantage of the faith of our citizens. Therefore, this requirement for registration of proper management of companies is long overdue, so that our people are not exploited as they have been. The other thing is that this country, quite apart from foreign direct investments, is a very attractive destination for major corporations based overseas. You have seen recent reports that up to nine major corporations, including banks like HSDC, are now interested in opening their headquarters in this country. The best way to speed up this process in order to create employment and open up our country for investments is to have a law that is widely recognized. In fact, speaking for myself, I salute those major corporations that have already opened up offices in Kenya even before we modernize our law and we reform it. The other one is protection of shareholders as the Attorney-General has mentioned. The law that is on the Table will bring greater protection of shareholders, so that the share certificate is recognized as a record of title and the shareholder will have greater protection, including the cost. Allow me to talk about foreign companies and encourage hon. Members to look at Part 29 of the Bill starting from Clause 598 to Clause 607. This is a very fertile ground for attracting companies from all over the world, so that they can come and employ our people, take advantage of the major location of this country relative to the East African Community and COMESA, so that our people can gain further benefits from incorporations. The mechanisms introduced including electronic transfer of documents is really a revolutionary concept that I want to salute the hon. Attorney-General, the Law Reform Commission and many others who have participated in this law including my own Ministry. The other one is takeovers and mergers. If you look at Clause No.314 onwards, you will find that for the first time in this country, we have made provisions. We are tabling in this House proposals for managing takeovers, so that they do not occur under the table or in darkness like the mating of cockroaches. The timing of these proposals is very important, so that the public can participate and be aware of companies that are merging or are proposing takeovers. You will find the Capital Markets Authority expressly mentioned in those provisions. The other one is auditors. I have a lot of time for professionals of this country. However, the shareholders of companies in Kenya have suffered greatly over the years because of inadequacies of the legal provisions regarding how companies are audited and how those reports are made available to them. For this reason I recommend the Bill. The other one is debentures. They are also provided for. For the first time, express provision is made to enable companies to tap capital without necessarily just going out there, borrowing direct loans which are highly expensive. Debentures are also provided for. They are an essential source of capital for companies. The provisions in this Bill will enable companies to take advantage of them in a manner that taps the potential of Kenyans. Mr. Temporary Deputy Speaker, Sir, recently, this country was surprised to know that the recent electronic transfer of funds moves close to, if not, more than Kshs1 billion a day. Therefore, the opportunity in this country to harness savings for the benefit of revenue generation in this country is very important. As I have said from the beginning, one of the most attractive features of this Bill is the capacity of the court to order investigation of companies where shareholders are being misled or cheated and, above all, the method of managing the documentation. Mr. Temporary Deputy Speaker, Sir, with those very many remarks, I beg to support."
}