Statutory Compliance is the act of adhering to a law, rule, policy, or guideline pertaining to business procedures in a particular jurisdiction. Following the president’s approval of the Companies Act, 2015 on September 11, 2015, and its full implementation in June 2016, Kenyan companies were given a variety of files that they must submit to the Registrar of Companies.
These filings include:
1. Filing of Annual Returns.
As per regulations, companies must prepare and submit annual returns to the Registrar before their return date. This date is either the anniversary of the company’s incorporation or the date of the last filed return, whichever is later. For example, if a company was incorporated on January 18, 2022, its next annual return would be due on January 18, 2023. However, if there is a delay and the return is filed on January 20, 2023, the next return would be due on January 20, 2024.
2. Filing of Financial Statements.
Financial statements for each financial year must be filed with the Registrar by a company’s directors. The deadline for submitting financial statements for public companies and companies limited by guarantee is six months after the financial year’s conclusion. While Private Companies must file their financial accounts nine months after the end of the financial year al year. The statements and related reports must be filed jointly. These are the reports from the auditors and directors.
3. Changes in the Company.
A company may undergo various changes such as the appointment or resignation of directors, changes in shareholding, and amendments to the company’s articles of association or registered office. These changes can also include alterations to the financial year-end. According to the Companies Act of 2015, companies are required to notify the Registrar of Companies about these changes. Failure to comply with this requirement can result in financial penalties for the company officials who violate the regulations.
4. Filing of Ultimate Beneficial Ownership
As of 2020, companies must comply with the Beneficial Ownership regulations by disclosing their Ultimate Beneficial Owners (UBO), creating a Register of Beneficial Owners, and submitting it to the Registrar of Companies. The Companies Registry has confirmed that the Beneficial Ownership Information is confidential and assured companies that their data will be kept private.
5. Employee deduction.
Employees’ salaries or wages are a very important subject especially when it comes to managing monthly deductions in Kenya. These statutory deduction figures and the other organization’s monthly deductions continue changing due to the country’s law amendments.
The Employment Act of Kenya, Section 19(1), permits the employer to deduct any amount from an employee’s wage as a contribution to a fund or program that the employee has consented to support and that has been approved by the commissioner for labour. Among the fundamental statutory deductions are:
- PAYE (Pay As You Earn) under the Income Tax Act Cap 470.
- NHIF (National Hospital Insurance Fund) under NHIF Act Cap 255 and NHIF Act No. 9 of 1998.
- NSSF (National Social Security Fund) under NSSF Act No. 45 of 2013.
- NITA (National Industrial Training Authority) under the Industrial Training (Amendment) Act, 2022.”
- Housing levy under the Finance Act 2023.
Companies are urged to comply and file the necessary filings to avoid the above complications. As it has been repeatedly proven it is easier and more cost-effective to comply than to deal with the repercussions of non-compliance.
POLICIES:
A policy outlines what an organisation, a company, or even a nation hopes to achieve and the methods and principles it will use to achieve them. A policy document is not a law but it will often lead to the creation of a Law.
LEGAL FRAMEWORK FOR FORMULATION OF POLICIES IN EMPLOYMENT
Constitution of Kenya 2010
Article 2 of the Constitution of Kenya 2010 embodies the supremacy of the constitution. The Constitution binds everyone; any state authority or power conforms to the Constitution. Its validity or legality is unchallengeable and all Laws in Kenya must conform to it.
Therefore, it is the ultimate legal framework for Standards, Policies, and Procedures. Any Standard, Policy, or Procedure that does not conform to the constitution is void.
In the case of Paul K. Semogerere & 2 others – v- The Attorney General, Constitutional Appeal No. 1 of 2002108 it was opined that:
“It is the Constitution, not Parliament nor the executive nor judiciary which is supreme.”109
The Constitution lays the background upon which all other Legislations (Standards, Policies, and Procedures) follow. It is also important to note that where there is a conflict between Policies and the Law, the Law supersedes and the Constitution supersedes all Law.
Employment Act 2007
It is required by law that all employees receive equal pay for work of equal value, and any employer who fails to adhere to this rule will be committing an offense. The Employment Act’s Section 6 specifically forbids sexual harassment, and it should be included in every organization’s model Standards, Policies, and Procedures manual. If an employer has twenty or more employees, they must issue a Policy statement on sexual harassment after consulting with their employees or their representatives. Each person under the employer’s direction must be made aware of this statement.
Section 15 dictates that every employer must display a statement detailing their employee’s rights in a conspicuous place accessible to all employees. If an employee suffers from a wrong deduction, they can file a complaint with the labor officer within three years of the incident. An employee’s company policy manual should outline procedures for this.
Section 27 of the Employment Act requires employers to regulate their employees’ working hours and provide them with at least one rest day every seven days. Section 28 entitles employees to 21 days of annual leave with pay, Section 29 entitles female employees to a three-month paid maternity leave, and Section 30 entitles employees to a sick leave.
According to Section 45 of the Employment Act, no employee can be terminated unfairly. Companies should create policies that align with the Employment Act, such as Employment, Termination, Code of Conduct, Sexual Harassment, Disciplinary, and Wage policies.
Work Injuries Benefit Act
Section 7 of the acts states that every employer should obtain and maintain an insurance policy, with an insurer approved by the Minister in respect of any liability that the employer might incur under this Act to any of his employees.
Section 10 states that an employee who is involved in an accident resulting in the employee’s disablement or death is subject to the provisions of the Act, and entitled to the benefits provided for under the Act. Policy therefore prescribes remedies and procedures for employee’s injuries on duty.
Examples of Policies that can be created in line with this act.
- An insurance policy for all workers
- A compensation policy
Steps taken in policy formulation.
1) Identify and define the problem: Many conditions create disturbance and distress to people. An organization needs to know the problem that is there that necessitates a policy. This will lead to the understanding of the purpose of the policy.
2) Setting and building the Agenda through a priority list of the problems an organization is seeking to rectify.
3) Formulating the policy by researching what other organizations have done. It involves a lot of consultation of stakeholders as well.
4) Presenting and adopting the policy by the Management.
5) Communicating and popularising the policy for people’s understanding.
6) Implementing (action stage): Many policies are carried out by administration agencies; it is therefore important that the policy is carried out and punishes the non-compliance
7) Monitoring, Evaluating, Reporting, and learning from the outcomes of the Implementation of the policy.
ESSENTIAL CONTRACTS IN AN ORGANISATION
The most essential contract in all organisations is an employment contract for every employee who works within that organisation. Section 9 of the Employment Act goes further to provide for the particulars to be contained in written employment contracts. It provides that a written contract of service shall state—
- Name, age, permanent address and sex of the employee
- Name of employer
- Date of commencement of employment
- Job description of employment
- Form and duration of the contract
- Place of work
- Hours of work
- Remuneration, rate and method of calculation and details of any benefits
- Interval at which remuneration is paid
Any other contract created by a company is governed by the terms and conditions set out by the company and must be in line with the articles of association.
CONCLUSION
Failure to comply with the set regulations not only results in hefty penalties and fines to the Company and each of its officers deemed to be liable, but can also lead to censures, reputational damage, and jail time.
For a policy the company can create a policy depending on the change they are facing and wish to address however, the policies should be in line with the constitution and necessary law.
Statutory Compliance is the act of adhering to a law, rule, policy, or guideline pertaining to business procedures in a particular jurisdiction. Following the president’s approval of the Companies Act, 2015 on September 11, 2015, and its full implementation in June 2016, Kenyan companies were given a variety of files that they must submit to the Registrar of Companies.
