Kenya

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Introduction to the Country

Quote
"It is important to nuture any new ideas and initiatives which can make a difference for Africa."
Professor Wangai Maathai (Nobel Peace Prize Winner; and Environmental and Women's Rights Activist)
 

Population
Kenya has a population of approximately 39,002,772 million people (July 2009 estimate).

Capital
Nairobi

Government type
Kenya has a presidential representative democratic republic. It has a president who is both the head of state and head of government; and of a multiparty system.

Legal system
The Kenyan legal system is based on Kenyan statutory law, Kenyan and English common law, tribal law, and Islamic law.

Economy overview

In general, Kenya is perceived to be the regional hub for trade and finance in East Africa. As at May 2010, the economic indicators suggested that a positive growth rate of 4-5% GDP was expected. This was largely due to expansions in the tourism, telecommunications, transport, construction sectors and a recovery in agriculture.

The Kenyan economy is primarily market based, with a few state owned infrastructure enterprises, and maintains a liberalised external trade system. Kenya’s economy is reasonably diversified as the tourism industry is Kenya’s largest foreign export earner followed by agriculture, which is the second largest contributor to the country’s GDP. 

The Kenyan government is considered to be investment friendly and has enacted several regulatory reforms to simplify both foreign and local investment. In comparison to other countries in the region, it has a well developed social and physical infrastructure making it an alternative location to South Africa, for major corporations who seek a point of entry to the African continent.

 

 

 

Map

 

Next election due
The next general election is scheduled for 2012.

 

Legal and Regulatory framework

Electricity generation and distribution in Kenya used to be a monopoly that fell under the Kenya Power and Lighting Corporation Limited (“KPLC”). The generation of electricity has since been liberalised and as a result several Independent Power Producers (“IPP”) have surfaced on to the market.  There are currently four IPPs operating in Kenya; Iberafrica Power (K) Limited, Orpower 4, Rabai Power Limited and Tsavo Power Company Limited. The IPP sector is an emerging market from both a development and business perspective; and the potential for growth is substantial. During the last eighteen months period, the Rabai project and the Olkaria III geothermal project have reached financial close and have gone online and there are more projects in the pipeline.

At present the largest electricity generator is the Kenya Electricity Generating Company Limited (“KenGen”) which is a public listed company and majority owned by the Government of Kenya (“Government”). All public generating power stations are run by KenGen and by virtue of this arrangement KenGen produces 80% of Kenya’s electricity.  On the whole, KenGen produces 80% of Kenya’s electricity as a result of the fact that it runs all public generating power stations. KPLC is currently a monopoly with regard to the distribution of electricity; however the Energy Act (“the Energy Act”) No.12 of 2006 does provide for the licensing of other electricity distributors. The Energy Act came into force on 7th July, 2007 and is the overarching statute regarding the energy sector. Recently KETRACO has been established as an entity to operate, maintain and develop the high voltage transmission line network in Kenya.

The Energy Regulatory Commission’s (“ERC”) website has a list of licensed power producers.  However, farms such as Oserian Development Company Limited, James Finlay (Kenya) Limited and Brooke Bond (K) Limited produce power solely for consumption on their respective farms.

 

 

 

 (a) Key enabling legislation

(i) List of key legislation and regulations:

(A) The Physical Planning Act No. 6 of 1996, stipulates that for any development to take place within the jurisdiction of a local authority, development permission must be sought from the relevant local authority.

(B) The Environmental Management and Co-ordination Act No. 8 of 1999 ("EMCA"), provides that any person initiating a project which is considered an activity out of character with its surrounding, a structure of a scale not in keeping with its surrounding and a major change in land use is required to be licensed. The National Environment Management Authority ("NEMA") is the regulatory body vested with the power to assess projects with regard to the discharge of pollutants. In addition, NEMA has the power to grant licenses on the basis of mitigating factors pertaining to the discharge of pollutants. The EMCA provides that NEMA has wide ranging powers to police offences; and issue fines and punishments accordingly.

(C) The Occupational Safety and Health Act No.15 of 2007, replaced the Factories Act (Cap 514). This governs issues pertaining to areas of health and safety within the workplace. The fundamental provisions of the Act provide that it is essential to have safe machinery in the workplace. The Act provides for regular inspection requirements and annual work place audits which must be conducted by experts.

(C) Land Legislation. Kenya has several land acts which govern different areas of the country. The various land acts provide for the regulation of the relationship between landlord and tenant, or a chargor and chargee; and most importantly the rights of forfeiture and the powers of sale. Nevertheless, it should be noted that in circumstances where the land is designated as agricultural, foreign ownership of the land (other than through the vehicle of a public company) is prohibited.

(D) The Geothermal Resources Act No.12 of 1982, only applies to situations where the power is being generated through the extraction of geothermal steam. The Act stipulates that a licence would be required for the extraction of geothermal steam

(E) Investment Promotion Act No.6 of 2004 (IPA) was enacted by the Government to promote direct foreign investor in Kenya. The Act provides for the issuance of a certificate that would entitle the holder to obtain the requisite consents, permits or licences.

(F) The Water Act No.8 of 2002, provides that all water is vested in the state. As a result, any person who intends to use a water resource must obtain a water permit. The regulatory body established under this Act is the Water Resources Management Authority ("WRMA").

(G) The Public Health Act (Cap 242) states that the relevant local authority should conduct an inspection of buildings and ensure that the buildings are in compliance with the requirements of the Act. Following a satisfactory inspection, the local authority would issue a certificate confirming the fitness of the premises.

(H) The Forests Act and Wildlife (Conservation and Management) Act could be applicable depending on the location of the IPPs project.

 

 (b) Powers and capacity of the Government and Constitutional issues

(i) Government involvement

The estimated time scale for the incorporation of a company in Kenya is approximately one month. The requisite filing fees payable to the Registrar of Companies are approximately K.Shs.3,000.00 (for a company with a Nominal Capital of K.Shs.100,000.00). In addition, stamp duty is payable on the nominal capital of the company at the rate of one per cent (1%).

(ii) Powers of Government

The Government derives its executive powers from the Constitution of Kenya. Most of the regulatory bodies are created by parliament and they derive their powers from statute. The Government has the authority to formualate policies regarding the production and supply of energy in Kenya.

(iii) Powers in respect of the project

The Government does not have the power to enter into contracts, pertaining to the generation of electricity, in which the Government is not involved contractually. Once the licences have been granted the parties operate independently of the Government.

As detailed below, the Government has not, in recent IPPs, provide any form of direct guarantee in respect of KPLC's payment obligations. The Government has, however, agreed to assume liability for certain political risks which could impact the project.

(iv) Power to contract

The Government has the power to enter into commercial contracts. The Government is afforded limited immunity in a civil trial. Where a judgement is obtained against the Government there are certain exclusions afforded to it in relation to the attachment of its assets, the relevant statute being the Government Proceedings Act (Cap 40).

(v) Legislative restrictions applicable to the giving of sovereign guarantees

The Guarantee (Loans) Act (Cap 461) stipulates that the Government is precluded from giving soveriegn guarantees withouth the approval of parliament. On recent IPPs, a sovereign guarantee has not been provided, but Government has assumed liability for certain political risks which could impact the project.

 (c) Regulator

(i) Overview of regulators and their powers

The Energy Act consolidated the regulation of the petroleum and electricity industries; and established the ERC which has oversight over the Act's broad applicability. The Act stipulates that a licence is required to conduct the following activities: importing, exporting, generating, transmitting, distributing, supplying or using electrical energy; importing, exporting, transporting, refining, storing and selling petroleum or petroleum products; producing, transporting, distributing and supplying of any other form of energy, and to all works or apparatus for any or all of these purposes. The procedure for applying for the relevant licence is prescribed by the Act.

(ii) Does the regulator typically enter into project documents relevant to the Projects?

Although the ERC is a corporate body, it can enter into commercial contracts. In respect of IPPs, the ERC would be required to approve the form of the PPA and issue the generation licence. On recent IPPs, it has also been the case that a letter of comfort has been issued by ERC to assist in project financing requirements.

(iii) What is the form of license issued and can it be amended?

There is a standard form of licence issued that is not open to substantial negotiation. The Act gives the ERC the discretion to grant the licence with or without conditions.

(iv) Is the regulator regarded as being genuinely independent from government/the utility? How is the regulator funded?

The overriding legislation would be the EMCA in that most of the other licences will only be granted after the Environmental Impact Assessment ("EIA") study and approval for an Environmental Impact Assessment Licence ("EIAL") has been obtained pursuant to the provisions of EMCA.

 (d) Procurement

(i) Procurement or tender process

Kenya has a centralised form of Government which controls the decision making process for all of Kenya's eight provinces. The responsibility of ensuring that Kenyans have access to sources of energy is bestowed upon the Ministry of Energy. Power generation is no longer a monopoly as there are a number of IPPs operating in Kenya. The ERC is the regulatory body established by the Energy Act that grants the licences available under the Act.

The Government involvement depending on whether it is a petroleum project or electricity project could be from the Ministry of Energy, the ERC, NEMA, WRMA and the relevant Local Authority which become involved under the Physical Planning Act, the Public Health Act and the issuing of Single Business Permits.

The ERC is in charge of regulating the petroleum and electricity sectors and ERC's mandate extends to related products, renewable energy and other forms of energy. It also ensures that the interests of the consumers are protected and maintains fair competition in the market. Moreover, the ERC is expected to prepare a national energy plan. It should be noted that since the Energy Act has been enacted relatively recently there is some overlap of powers between the Ministry of Energy and the ERC. Some licensing powers are still held by the Ministry while others by the ERC.

The ERC currently has a model PPA advertised on its website. The said PPA would generally form the basis of any PPA to be entered into with a Kenyan entity.

The Energy Act expressly provides that the ERC shall be an independent body however the Commissioners of the ERC are made up of people appointed by the President of Kenya and the Minister for Energy and the ERC's funding is controlled by the Government therefore there is a perception that the regulator is not as independent as it perceived to be.

(ii) Other specific procurement requirements

Please contact us for specific questions.

 (e) Power plants

(i) Is there a standard form of power purchase agreement?

There is no standard form prescribed by legislation. There have, however, been a number of IPPs in recent years (Tsavo, Rabai, Olkaria) and the form of PPAs negotiated on these projects have, in general, large points of similarity and it is likely such a form of PPA would be utilised for any further IPP in the country (as is currently the case in a number of IPP negotiations ongoing in Kenya). Each of Walker Kontos and Trinity have been involved in a number of IPPs in recent years.

(ii) Independent Power Projects: are there any IPPs in existence?

Please see “Legal and Regulatory Framework” section.

(iii) Merchant power: are there merchant power plants and if so, are they allowed to (or obliged to) sell power back to the grid?

Each of the IPPs undertaken to date in Kenya have sold all capacity/energy to KPLC pursuant to a long-term PPA.

 (f) Consents required and authorisations from other ministries

(i) List of key licenses, permits or consents

The Government involvement, depending on whether it is a petroleum project or electricity project, could be from the Ministry of Energy, the ERC, NEMA, WRMA or the relevant Local Authority, which become involved under the Physical Planning Act, the Public Health Act and the issuing of Single Business Permits.

The key licences required are:

  1. the Generation Licence issued pursuant to the provisions of the Energy Act;
  2. a Geothermal Licence, or Water Permit depending on whether its hydro electric power or geothermal power;
  3. a Certificate of Compliance by the local authority in relation to the Physical Planning Act;
  4. approval of the power purchasing agreement by the ERC;
  5. an Environmental Impact Assessment Licence granted by NEMA;
  6. registration of the project as a work place under the Occupational Safety and Health Act;
  7. approval of the building plans by the Commissioner of Lands where the title to the property is leasehold; and
  8. depending on the nature of a grant of property the consent of the Commissioner of Lands may be required to charge (create security over) the property.

(ii) Are consents capable of being secured and are transferable to the lenders?

The Generation Licence can be transferred in the event that the Lenders are enforcing security with the consent of the ERC. Furthermore, if a geothermal or water permit has been granted, the consent of the Minister or WRMA is required to transfer the permit. Although the licences do not form security, it has become practice for lenders to obtain comfort letters from the regulators acknowledging that a security has been created over the project assets. Therefore, in the event of default, the regulators will permit the transfer of the licences.

(iii) Process of application for consents

Please contact us for further information.

 (g) Competition law

(i) Exclusivity: are any rights of exclusivity granted to a project company enforceable?

There are provisions in specific statutes that provide for the enforcement of rights of exclusivity. For instance, the Geothermal Resources Act stipulates new bores may be closed by order of the Minister for Energy if it affects the productivity of existing bores, in the event that the right to exclusivity requires enforcement through the court system it may be difficult to obtain a court order as the legal system in Kenya is notoriously slow.

(ii) Restrictions on competition: are there any restrictions on the ability of a project company to compete freely in the country?

KPLC is still the sole distributor of electricity in Kenya, as a result it hinders competition to some extent.

 (h) Environmental regulations

(i) Regulations: are there any environmental or health and safety regulations or legislation applicable to power plants?

NEMA requires a reasonably long and "thorough" application process before granting an Environmental Impact Assessment Licence ("EIAL") to begin. Further, an EIAL is a prerequisite for a development plan under the Physical Planning Act or for licences granted in acccordance with the provisions of the Energy Act.

The Occupational Safety and Health Act No.15 of 2007 requires a project to be registered as a work place in accordance with the provisions of the Act.

(ii) Additional consents required by a project company

There are supplementary environmental licences required that can be obtained from NEMA such as effluent discharge licences, emissions licences or a borehole licences. The need for the above mentioned licences can only be determined after the environmental impact assessment studies have been completed. Depending on the nature of the power generating project a water abstraction permit may be required.

There are other licences like certification under the Standards Act, VAT registration for the Kenya Revenue Authority ("KRA"), PIN registration and National Social Security Fund ("NSSF") registration for the employees.

Finance and Tax matters

(a) Financial assistance

(i) Does the concept of financial assistance exist?

The concept of financial assistance in Kenya is prohibited by virtue of section 56 of the Companies Act (Cap 486). The courts recognise the concept of commercial benefit and this would have to be proved before the issuance of guarantees by companies.

(b) Lending restrictions/banking monopolies

(i) Any restrictions applicable to the importation of capital by lenders?

There are no restrictions.

(ii) Requirement for the lenders/security agent to be registered in the jurisdiction?

According to the Banking Act (Cap 488), lenders who do not take deposits are not required to obtain a banking licence. The lenders are permitted to operate through a registered branch set up locally.

(iii) Can foreign lenders lend into the jurisdiction?

Yes.

(c) Restrictions relating to repatriation of dividends

(i) Are there any restrictions relating to repatriating dividends?

Dividends maybe repatriated however withholding tax is chargeable on dividends.

(d) Convertibility

(i) Are there any restrictions on the convertibility of the jurisdiction's currency?

None.

(e) Interest payments

(i) Are there any restrictions on the payment and compounding of interest? If so, does this also affect both local and foreign lenders?

There are no restrictions on the payment and compounding of interest. However, the in duplum rule is in force, and banks are only permitted to recover a maximum of twice the principal amount owing at the time the loan becomes non-performing plus the costs of recovery. This rule applies to both foreign and local lenders.

(f) Tax

(i) Are there any withholding tax issues in relation to interest? If so, does this also affect both local and foreign lenders?

Withholding tax is chargeable at different rates for residents and non-residents:

Non-Resident  Resident

Management fees                                       20%

Professional fees                     5%              20%

Royalties                                 5%              20%

Dividends                                5%              10%

Interest                                15%              15%

(ii) List of double taxation treaties:

  1. United Kingdom
  2. Germany
  3. Denmark
  4. Norway
  5. Sweden
  6. Canada
  7. India; and
  8. Zambia

(iii) Lender risks in respect of tax liabilities/tax domiciliation as a result of providing debt and/or taking/enforcing security interests

Please contact us for further information.

(iv) Can loan repayment/enforcement proceeds be treated negatively from a tax perspective for the lenders?

Please contact us for further information.

(g) Stamping costs

(i) Details of stamp duty costs

(A) Stamp duty on principal security documents is payable at the rate of 0.2% of the principal amount, and if there is collateral security it is charged at the rate of 0.1%.

(B) For supplemental security stamp duty is at a nominal charge of K.Shs.200.00.

(C) Wth regard to the sale of immovable property, stamp duty is charged at a rate of 4% of the selling price and the same rate of stamp duty is applicable when immovable property is sold pursuant to enforcement of security.

(D) Stamp duty for the increase of share capital is calculated at the rate of 1%.

Security, Enforcement and Insolvency

(a) Overview of security regime

(i) Can a security interest be obtained over a company's assets e.g.:

(A) accounts receivable (book debts); Yes.

(B) inventory (stock in trade); Yes.

(C) shares of a company (issued and authorised); Only issued shares.

(D) equipment; Yes.

(E) real property; Yes.

(F) insurances; No. and

(G) project contracts; Yes.

(ii) Can shares of a project company validly be pledged and enforced under an English law share charge?

Yes.

(iii) Can a company grant a security interest in order to secure its obligations (i) as a borrower under a credit facility, and (ii) as a guarantor of the obligations of other borrowers and/or guarantors of obligations under a credit facility?

Yes, provided the memorandum and articles of association allow for the same. (iv) If the borrowings to be secured are under a revolving credit facility, are there any special priority or other concerns?

Please contact us for further information.

(v) Can the relevant security interests be granted to a security agent or trustee on behalf of the lenders from time to time?

The concept of a trust is recognised in Kenya and it is therefore possible to appoint a security agent/trustee. In addition the original lenders can be changed by way of assignment or novation.

(vi) Please indicate the claims that would have priority over the relevant security interests.

Please contact us for further information.

The following order of priority would take precedence over (a) other unsecured creditors and (b) secured creditors, with regard to any assets charged in favour of such creditors by way of floating charge:

(A) all taxes and local rates due at the relevant date and having become due and payable within twelve months before that date not exceeding in the whole one year's assessment;

(B) all government rents not more than one year in arrears;

(C) employees' (other than directors') wages or salary for four months prior to the relevant date and all workman's or labourers' wages for services rendered, not in either case exceeding K.Shs. 20,000.00 per individual claimant;

(D) all retirement benefits contributions of any employee of the Company not exceeding K.Shs. 20,000.00;

(E) amounts due by way of workmen's compensation;

(F) amounts due in respect of contributions payable during the period of 12 months immediately preceding the relevant date under the National Social Security Fund Act, Chapter 258 of the Laws of Kenya.

(vii) Is there a public security registry?

There are two types of registries in Kenya. The first, is the lands registry where any security created over any immovable property owned by the company, or its affiliates, is registered. The second, is the companies registry where debentures and charges created by a company are registered.

(viii) Formalities: in connection with the creation of a security interest in shares or other assets:

(A) Statutory perfection requirements;

The consent of the Commissioner of Lands (or other head lessor) is required for the perfection of a security interest in a property leasehold. It is a requirement that the security interst is filed the Lands Registry and Companies Registry, the Companies Registry will issue a Certificate of Registration for Charges and Debentures.

(B) Any other formalities

A company's board resolutions are required for the creation of security interests. In addition, if a company has created previous securities, it is required to give notification of such securities to its existing secured creditors.

(C) Steps for perfection and length of time taken

Following the due execution of the security documents, the documents are sent for stamping which takes approximately seven (7) working days. Thereafter, the documents have to be registered at the Companies Registry which would take approximately five (5) working days. Moreover, in the event that there is a charge over the property, the documents would have to be registered at the Lands Registry, which takes approximately seven (7) working days.

(D) Any significant financial costs or significant time delays required to create and perfect the relevant interest?

Time delays are common in Kenya as both the lands and companies registries are poorly organised and files are often misplaced.

(b) Insolvency and enforcement regime receivership

(i) Is there a court or similar register that can be searched in respect of proceedings and insolvency actions?

There is a court register which is open to the public but is yet to be computerised. Therefore one can search the register for ongoing proceedings and insolvency actions.

(ii) Summary of the different options for an insolvency related process.

(A) Kenya does not have a specific insolvency statute in force. However, the insolvency, receivership and liquidation of companies is within the ambit of the Companies Act. According to the Act, a company may be wound up pursuant to the said act through:

(I) a compulsory winding up by the court;

(II) a voluntary winding up, which may be either a member's voluntary up or a creditor's voluntary winding up; or

(III) a winding up subject to the supervision of the High Court.

In all the aforementioned scenarios, after the decision is made to wind up the company either through a court process or members' resolution the assets of the company vest in the liquidator, who winds up the company.

(iii) Are summary or expedited proceedings available?

Kenyan debentures provide for the appointment of a receiver. The power to appoint a receiver can be exercised at any time by the debenture holder and this appointment is not supervised by a court. There are no restrictions on a debenture holder to refrain from exercising its rights of appointing a receiver as this could result in a loss to the company and its unsecured creditors.

(iv) Are any governmental or other consents required in connection with:

(A) the enforcement of a security interest in shares; No.

(B) the enforcement of a security interest in other assets; No. or

(C) the enforcement of a guarantee (sovereign or otherwise)? No.

(v) Do lenders inherit all environmental liabilities when they become owner of the shares upon enforcement (or at any other time)?

The definition of "owner" under EMCA is relatively wide and therefore lenders would inherit environmental liabilities upon enforcement.

(vi) Can security interests be enforced by both private sale and public auction, and is it necessary to appoint a court or other official to carry out the enforcement?

There are two statues that form the substantive law for land in Kenya:

(A) The Registered Land Act (Cap 300) ("RLA"); and

(B) The Transfer of Property Act, 1882 ("TPA").

Under the RLA an auctioneer must be appointed and a public auction conducted when a lender exercises the power of sale. Under the TPA private treaty is an acceptable method of selling the property. Hence, the Court does not carry out the enforcement of the security interests.

Corporate, Insurance and Employment matters

(a) General corporate issues

(i) Project company incorporation:

(A) Type of corporate vehicle

(I) Any of the following vehicles governed by the Companies Act would be a suitable project vehicle depending on the structure of the project and based on the project vehicle's ownership and taxation issues: a private limited liability company which must have a minimum of two shareholders and two directors and the registration currently takes up to one month due to the restructuring of the Companies registry;

(II) a public company requires a minimum of seven shareholders and two directors. This vehicle may be favourable for trying to raise funding for the project through equity and eventual listing on a stock exchange (a company must fulfil the requirements of being a public company in order to be eligible for listing). The registration period is also approximately one month; and

(III) a branch of a foreign company with established premises in Kenya for purposes of carrying on business in Kenya. This would also require a month to register.

(B) Issues relating to thin capitalisation

The Income Tax Act (Cap 470), contains provisions on thin capitalization of foreign controlled companies where a company incorporated in Kenya is controlled by a non-resident person alone or together with four or fewer other persons and, the highest amount of all loans advanced to that company at any time during the year are more than three times the sum of the revenue reserves and the issued and paid up capital of that company. The Kenya Revenue Authority bars any tax deduction on the part of the interest that exceeds the prescribed ratio of debt to capital (3:1).

(C) Requirement to have indigenous shareholdings

There are no specific restriction(s) on indigenous shareholding, however there may be statute based restrictions; for instance in the insurance industry.

(I) Thin capitalisation requirements

See above.

(II) Can a limited liability company be established?

See above.

(III) Is it possible to use a foreign company or a branch of a foreign company to act as project company?

It is possible provided the company first acquires a certificate of compliance pursuant to part X of the Companies Act.

(D) Estimated timescale for incorporation in the country. Are there any specific fees or other costs payable to governmental authorities in respect of incorporation?

There are generally no minimum capital requirements for companies however the industry minimum has been set at K.Shs.2,000.00. In addition, there are specific statutes which may provide for minimum capitalization requirements depending on the industry or nature of business governed by those statutes.

(b) General corporate issues

(i) Is a private company free to lend and/or issue guarantees?

A private company can lend money but can only issue guarantees if the same is provided for in its memorandum and articles. Where companies are not related commercial benefit must be proved.

(ii) Are there any restrictions on dividend distribution?

There are no restrictions on the distribution of dividends.

(c) Insurance

(i) Mandatory insurance: are there any insurances which the project company or the Project is required to have by law (or regulations or similar)?

There are no mandatory insurance requirements in relation to the Project assets or project company.

(ii) Is there any minimum requirement to place the insurance with local insurers or any other similar restrictions? If so, can reinsurance be lawfully placed internationally?

Ideally insurance business (other than reinsurance business) should be placed with a Kenyan insurance company. However, insurance can be placed with foreign companies with prior written approval of the Commissioner of Insurance.

(iii) Are there any restrictions in respect of granting security rights over the insurances or reinsurances?

The Insurance Act (Cap 487), provides that an insurer is only permitted to secure temporary loans or overdrafts by way of a mortgage or charge which is not over ten per cent (10%) of its admitted assets.

(d) Employment

(i) Legislative/regulatory issues: is there any legislation or regulation impacting on foreign employees, in particular the conditions relating to work and residence permits? Please give an indication of the process and costs in relation to obtaining work and residence permits.

Foreign employees would require work permits as prescribed under the Immigration Act (Cap 172). An application for a work permit is made to the Ministry of Immigration and approval that takes between 2 - 6 months. Upon approval a security bond is required in the sum of K.Shs.100,000.00 and the fee payable is K.Shs.100,000.00. In addition, the approval of a work permit also ensures residency.

(ii) Foreign restrictions: are there any restrictions that apply to foreign employees and foreign contractors/subcontractors and if so what do they need to do in order to comply with local legislation?

There is a requirement that all foreigners should register for and obtain an alien registration card.

Land

(a) Land registry: is there a land registry (or similar) in the country that can be searched to confirm whether a project company has granted of any mortgage, charge, option assignment, lien or other encumbrance over the whole or part of the properties or assets of a company?

There are land registries that relate to the different land regimes. When a security or encumbrance is created over land it is registered against, the title at the registry and is considered a public record. Therefore one can conduct a search at the relevant registry to enquire on possible encumbrances.

(b) Landlord's rights: please indicate whether there are any rights which accrue to the landlord (or the overnment or any other bodies) that may override the terms of a land lease or threaten the rights of a project company particularly any right of repossession or acquisition.

The Land Acts provides that, the Government or a private person, acting as a Landlord, can re-enter leased premises and forfeit the Lease when there is a breach of the terms of the lease.

Overriding the above rights are the provisions of the Kenyan Constitution and the Land Acquisition Act (Cap 295) which, subject to certain qualifications, gives the Government the right to compulsorily acquire land for the payment of compensation.

(c) Direct agreement: are you aware as to whether a direct agreement in respect of a lease has previously been provided to lenders on other transactions?

A direct agreement in respect of a lease has not been previously provided to lenders on other transactions in Kenya. Further, it is unlikely that such an agreement may be provided to the lenders in future.

(d) Forfeiture rights: do relief from forfeiture rights exist and would the lenders be entitled to rely on such rights?

The Government Lands Act (Cap 280) provides that the courts adjudicating on a forfeiture proceeding shall be guided by principles of English law and doctrines of good faith. There are no statutory rights providing for relief from forfeiture.

(e) Is there any additional legislation governing property rights?

Please contact us for further information.

(f) Are there any formalities with which lenders need to comply when enforcing security over land?

There is a requirement to give notice to the borrower for failure to pay the loan. Following the expiry of the notice period the lender may enforce the security by selling the land (see comments on 1.4 (b) (vi)) or appointing a receiver to manage the property.

International law and arbitration

(a) Supra-national treaties

(i) List all Bilateral Investment Treaties to which the country is party.

Kenya is a party to bilateral investment treaties with Germany, the Netherlands and the United Kingdom respectively.

(ii) Is the country a signatory to the Energy Charter Treaty?

Kenya is not a member state nor does it have observer status to the Energy Charter Treaty.

(b) Arbitration

(i) Requirements and restrictions applicable to the choice of arbitration roles and place of arbitration

The choice of Arbitration can be determined by the parties to the agreement and it does not necessarily have to be in Kenya. Kenya is also part of UNICTRAL.

(ii) Are foreign arbitral awards / decisions are enforceable in the country (i.e. is the country a party to the New York Convention on the Recognition of Foreign Arbitral Awards (the "Convention")?

Foreign Arbitral awards are enforceable in Kenya and Kenya is a party to the New York Convention on the Recognition of Foreign Arbitral Awards (Ratified on 11th May, 1989).

Renewable Energy

(a) Has the country enacted any legislation specifically designed to promote and enable the development of renewable energy projects?

Other than the Energy Act - no other legislation has been passed.

(b) Is the country is a signatory to the Kyoto Protocol?

Kenya is a signatory to the Kyoto Protocol, which was, ratified on 25th February, 2005 and came into force on 26th May, 2005.

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