Only 14pc of SMEs Access Legal Services in Kenya impeding compliance efforts


Only 14 percent of Small and Medium Size Companies  access legal services in Kenya according to a new report by KIOI & CO Advocates.

The report which was released at the launch of the firm’s virtual legal services, indicated that over 70 percent of SMEs do not access legal services citing cost as the major factor. With over 100, 000 companies registered in Kenya every year, very few make it to their third birthday mostly due to compliance issues.

“Some of the major legal problems affecting SMEs include poorly drawn contracts or no contracts at all, little or no legal advice on agreements, bank loans as well as failure to meet compliance set by the law ,” said Angela Kioi, founder, Kioi & Co  Advocates.

According to Company Registrar there are 326 new business registrations across Kenya daily, however many SMEs cite prohibitive legal fees as a barrier to engaging this vital service which negatively impacts their compliance efforts.

SMEs in kenya: Source World Bank

“We also realised that SMEs are losing upto 20 percent of revenue on bad debts that they give up on instead of seeking legal redress  to recover their money for services rendered,” added Angela.

The Kioi & Co virtual platform will see SMEs access legal services online without having to visit the law firms’ offices. Among the services being offered within the firm’s virtual legal suite include drafting and reviewing of contracts, debt collection, business registration as well as general legal advice.

The move comes even as government  continues to tighten legal requirements for business owners in Kenya.

Also Read: Coronavirus Legal Guide: Mozambique

The latest Beneficial Ownership Regulation gazettement by the Companies Registrar has notified all registered companies to update their beneficial ownership register by 31 January 2021, after which the Registry shall start enforcement of the same with a penalty of Sh 500, 000 for failure to comply.

The regulations shall apply to a beneficial owner who holds at least 10 percent of the issued shares in the company either directly or indirectly, exercises at least 10 percent of the voting rights in the company, holds a right to directly or indirectly appoint or remove a director of the company; or exercises significant influence or control over the company.

Data from the companies’ registry shows that the number of business names registered between July and September 2020 jumped 95 percent to 29,941 compared to a similar period last year. Compared to the quarter ended June, it means Kenyans registered an additional 9,649 companies between July and September—translating to an average 326 new registrations daily.

“We understand that for entrepreneurs, time is money, and their preferred mode of communication is virtual. This led us to explore how we can serve our clients better ,” she assured.

Kioi & Co is the premier innovative corporate and alternative dispute resolution law firm in Kenya.

We have dedicated years educating companies on the importance of legal compliance and the benefit a good corporate advocate brings to the company. We take the time to understand businesses and provide tailor made legal solutions.  We have a cumulative decade long experience in corporate law and alternative dispute resolution giving us a unique perspective on the Kenyan business climate and what your business needs to be successful.

Also Read: The legal basis to void Mozambique hidden debt

Yvonne Kawira is an award winning journalist with an interest in matters, regional trade, tourism, entrepreneurship and aviation. She has been practicing for six years and has a degree in mass communication from St Paul’s University.

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