Finance ACT, 2021 - Impact On Corporate Trustees
Updated: Aug 10, 2021
The Finance Act, 2021 (“the Act”) was assented to on 29th June 2021. The Act has made amendments to various laws, including the Income Tax Act (Cap 470), Value Added Tax Act (No.35 of 2013), Excise Duty Act (No. 23 of 2015), Tax Procedures Act (No. 29 of 2015), Capital Markets Act (Cap 485A), the Insurance Act (Cap 487), the Retirement Benefits Act (Cap 197) and the Central Depositories Act (Act No. 4 of 2000). This article is intended to highlight the impact of the amendments made to the Retirement Benefits Act (Cap 197) on corporate trustees.
One of the fundamental amendments to the Retirement Benefits Act, Cap 197 (“the Act”) brought about by the Finance Act, 2021 is the regulation of corporate trustees by introducing a registration and reporting & oversight regime. The Act defines a corporate trustee as a limited liability company incorporated under the Companies Act, 2015 which is empowered under any written law, charter, memorandum of association, deed of settlement or other instrument constituting it or defining its powers or objects to mainly undertake trusts. This includes a trust corporation. From the definition, it is not clear whether a corporate trustee can take the form of a body corporate other than a company.
Registration of Corporate Trustees
With effect from 1st July 2021, the Act prohibits a person to act as a corporate trustee unless that person is registered and holds a valid certificate of registration issued pursuant to the provisions of the Act. Any person who acts as a corporate trustee without being registered as such commits an offence, which upon conviction, attracts a fine not exceeding Kenya Shillings Five Hundred Thousand or imprisonment of a term not exceeding two years, or both.
Section 23 of the Act requires a person proposing to act as a corporate trustee to apply to the Retirement Benefits Authority (“RBA”) for registration and to obtain a certificate of registration prior to acting as a corporate trustee. In order to qualify for registration as a corporate trustee, the corporate trustee should meet the threshold set out under section 25C as to:
(1) minimum paid up share capital as may be prescribed by RBA;
(2) ability to meet the obligations of the members and the sponsors as specified in the scheme rules; and
(3) professional and technical capacity and adequate operational systems to perform its functions.
Further, the corporate trustee must not have been a corporate trustee of a scheme that has been deregistered, wound up or placed under an interim administrator due to any fault of the corporate trustee, management or administration.
The corporate trustee must have a board of directors and senior management of such number as may be prescribed by the RBA. The members of the board and senior management should be academically and professionally qualified in matters relating to administration of schemes, insurance, law, accounting, actuarial science, economics, banking, finance or investment of scheme funds.
Upon registration, a certificate of registration will be issued as contemplated under Section 29(2) of the Retirement Benefits Act. The certificate is a perpetual certificate and remains valid unless suspended or revoked. It is worth noting that there will be an annual fee payable by the registered corporate trustee to the RBA.
Reporting & Oversight
Section 29 provides that a corporate trustee is required to submit current audited financial statements, a list of directors and top management together with any changes in clientele by 30th September of every year. The corporate trustee is also required to disclose to the RBA all changes in shareholding, directorship or top management within thirty days after the change has occurred.
Section 41 now empowers the CEO of the RBA to cause an inspection of the business, books, accounts and records of a corporate trustee. The corporate trustee has an obligation of providing the person doing an inspection with all the books, accounts records and other documents such as correspondence, statements and information relating to the corporate guarantee as the inspector may require, within seven days or such longer period as the inspector may direct in writing. Failure to provide such information and documents as is required by the inspector constitutes an offence.
The Finance Act, 2021 has the impact of introducing registration, reporting and oversight regime applicable to corporate trustees. This has been achieved by amending the provisions of the Retirement Benefits Act. It is important for all current and future corporate trustees to ensure compliance with the provisions of the Retirement Benefits Act in order to avoid the penalties set out in the Act.
At the time of this article, RBA is yet to set the specific forms to be used to apply for registration and the annual fees payable by corporate trustees.
Article written by:
Gregory O Manyala
Patricia A Magor
This legal alert is prepared for informational purposes only and is not legal or other advice. You therefore not take, or refrain from taking action based on its contents. This legal alert is also not intended to create, and receipt of it does not constitute, an advocate-client relationship.