Move to unearth real firms’ owners timely
Kenya has slowly but steadily moved to unmask shadowy shareholders of companies by forcing the organisations to reveal the real names of investors who leverage proxies.
Hence the government’s order that all firms furnish the Registrar of Companies with the list of substantive beneficial owners by January 31.
The intention is not to only make it difficult to use proxies, but also help curb corruption and money laundering, and forestall terrorism threats.
It will be against the law to fail to disclose the information, as required by Section 93A of the Companies Act 2015, and could see companies face legal action.
This will make it difficult for companies, which only exist on paper, by exploiting legal systems and concealing ownership, to operate in the country, and could cushion resources required to pay for critical public services, but which are misappropriated or hidden in tax havens.
As demonstrated by various local scandals perpetrated by anonymous shell companies that easily divert public funds and conceal ill-gotten gains, real owners must be known to curtail the schemes. And why would one want to own companies using proxies?
The good news is that some local and international organisations are also pushing the upcoming United Nations General Assembly Special Session (UNGASS) to address anonymous companies and other legal vehicles that facilitate cross-border corruption and other crimes.
If this comes to pass, it will mean information on the persons who own, control or benefit from companies will enable cross-border enforcement, and help in tracing ill-gotten assets.
Further, this will go a long way to help detect corruption in public contracting as well as make it easier for businesses to carry out due diligence, since transparency in company ownership is more than a technical solution to a problem, and also a matter of social justice.
However, fears abound that if not handled well, particularly by fixing some of the legal challenges that came with the regulations, the process could scare away potential investors.
Amid dwindling direct foreign investment, concerns abound that the new laws could freeze interest from investors, particularly the stock exchange which is already grappling with a listing dry spell.
But whatever it takes, this is the right time to take care of the ownership issues, and tightly seal any loopholes that make it easy to hide money using proxies.