HOW TO PURCHASE A COMPANY /BUSINESS ENTITY IN KENYA

HOW TO PURCHASE A COMPANY /BUSINESS ENTITY IN KENYA

• THE  CONSTITUTION OF THE REPUBLIC OF KENYA
• COMPANIES ACT OF 2015
• CONTRACT ACT
• LAND LAWS
• RTA CAP
• INVESTMENT CODE ACT
• AMONG OTHERS

Please note that the laws applicable depend on the nature of the company as such you may be required to look at various laws.

1. Identify the company to purchase.
2. Identify the true shareholders and directors of the company in issue.
3. Approach the company directors and share holders to confirm their willingness to sell the company.
4. If the company is on sell proceed to conduct due diligence through transaction lawyer who will review the following among others to identify information relevant to inform the purchaser’s decision.

• Company incorporation documents,
• Identities of companies directors and share holders
• Return of allotment
• Company Annual returns from the year of incorporation to date
• Filled company forms.
• corporate structure,
• Articles of association and memorandum of association,
• corporate files:
• minutes of Board of Directors meetings,
• minutes of shareholders meetings,
• resolutions adopted,
• Shareholders identities,
• Shareholders/members register,
• instruments of transfer of shares,
• resolutions to issue shares,
• Deeds of issue of shares, among others.
• State corporate filings like statutory annual reports
• corporate governance related policies including conflicts of interest and ethics
• corporate insurance coverage
• authenticating instruments among others
• trademarks, trade names, domain names, and copyrights
• Proprietary information that should be protected
• Policies and third party agreements relating to non-disclosure of confidential information and ownership of intellectual property created by employees and contractors
• Procedures for maintaining confidentiality of trade secrets
• Licenses, contracts and other agreements relating to intellectual property and computer software to which the organization is a party or a third party beneficiary
• Grants likely to have IP provisions
• Joint venture agreements regarding production, transfer of know-how, technical assistance and similar agreements
• Agreements of joint research and development if any
• Compliance of existing of tax laws
• Compliance of procedural tax laws
• Past cases of interests, fines and penalties for non-compliance of tax laws
• Documents evidencing title to all material assets
• Leases of assets
• Distinction among private , customary land tenure , free-hold and lease hold properties
• Positive or restrictive covenants relating to the use of any property of the company
• Sales agreements (whether conditional or not)
• Purchase agreements including supply agreements and service agreements
• Agency agreements, marketing agreements, distribution agreements
• Lease or hire purchase agreements
• Joint venture agreements
• Non-competition agreements
• Standard forms of purchase and sale orders of the company
• General sales conditions and general purchase conditions of the company
• Employee manuals, handbooks and policies
• Distinction between employment contracts, agency contracts and independent contractors
• Employment contracts and appointment letters
• Procedures and practices for use of temporary workers
• Procedures and practices for terminating employees
• Employees benefits and compensation policy
• Main terms of labour agreements
• contracts and schedule notification of contract renewal dates
• Compliance with representations and warranties
• Policy for internal contract review, external review by counsel and execution of contracts
• Contracts with related parties and compliance with procedures for disclosing conflicts of interest
• Business relationships not covered by a written agreement
• Internal/external audit procedures
• Internal control procedures
• A list of all banks with which the company has a relationship, including a description of the type of account and the account number
• All agreement relating to borrowed money or lines of credit , Agreements relating to any loan or guarantee of obligations of any third party, whether affiliates or not Agreements for the granting of a mortgagor other security interest (s) in the company’s assets or properties, Main terms and conditions of securities: Registration of securities, mortgage deeds, Inter-company or inter-group indebtedness and securities or guarantees given in connection therewith

1. Proceed to conduct company search at company registry on the company’s record,  to verify the information so far gotten.
2. Establish from Uganda revenue authority whether the said company has any tax liability.
3. Based on the gathered information through due diligence, the intend purchaser should make a decision of whether to purchase or not.
4. If the intended purchaser is satisfied with the information gathered from the due diligence proceed with a decision to purchase, and then proceed to negotiate with the company’s authorized officers to determine terms and conditions for the transaction.
5. The company should make resolution for purposes of the sale, pay fee for it and file it at Registrar of companies in case it had not been made.
6. Prepare and execute the company’s purchase/sale agreement.
7. The company should make resolutions causing necessary changes in line with the company purchase.
8. Have the resolution assessed, paid for and filed at company registry
9. Notify the company Registrar of changes made and update the company record by filing company resolutions, change of company directorship and secretary, among others.
10. Both the seller and the buyers should sign instruments of transfer
11. Have the shares transferred to respective new share holders.

Author is A regional transactions legal consultant (ADVOCATE) at NOA REGIONAL ASSOCIATED ADVOCATES AND LEGAL CONSULTANTS.
Email address: onlinetransactionconsultancy@gmail.com.

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NOTE: whereas the author has made necessary efforts to ensure the accuracy of this post, it is not intended to provide specific legal advice to a particular individual as individual situations may differ.

For specific technical / legal transaction advice on this subject matter and related subject, you may contact the author at online consultancy fee, or contact any transaction legal consultant of your choice.
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