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A NEW DAWN FOR PUBLIC BENEFIT ORGANIZATIONS (PBOs) IN KENYA

A New Dawn for Public Benefit Organizations (PBOs) in Kenya

The Public Benefit Organizations Act, 2013 (PBO Act) has officially replaced the Non-Governmental Organizations Coordination Act, CAP 134 (NGO Act). This change, as outlined in the Kenya Gazette Supplement No. 100, under Legal Notice No. 78, was enacted by the Cabinet Secretary for Interior and National Administration, Hon. Kithure Kindiki. The PBO Act comes into effect today, May 14, 2024.

Public Benefit Organizations Act, 2013: From Inception to Implementation in 2024

The Public Benefit Organizations Act, 2013 was passed by Parliament in December 2012 and received approval from former President Mwai Kibaki in January 2013. Despite its passage, the Act remained inactive until May 9, 2024. On this date, the Cabinet Secretary for Interior and National Administration exercised the powers granted by Section 1 of the PBO Act, designating May 14, 2024, as the date for its implementation.

 

Public Benefit Organizations Act, 2013: A Detailed Overview and Analysis

The Public Benefit Organizations Act, 2013 (PBO Act) defines a “public benefit organization” (PBO) as a voluntary grouping of individuals or organizations, which can be membership-based or non-membership-based, and is characterized by being autonomous, non-partisan, and non-profit. According to the PBO Act, a PBO must:

  1. Be organized and operate locally, nationally, or internationally.
  2. Engage in public benefit activities in any of the areas outlined in the Sixth Schedule.
  3. Be registered as such by the Authority.

Key Enhancements Under the PBO Act:

  1. Introduction of the Public Benefit Organizations Regulatory Authority:
    • The Authority, under Section 34, is responsible for registering and de-registering PBOs, advising the government on their activities, maintaining the register, reviewing annual reports, ensuring compliance, and providing advice and training.
  2. Clear Guidelines for Registration:
    • Section 8 specifies requirements for registration, including necessary documentation for applications, registration criteria for international NGOs as PBOs, and constitutional information for PBOs.
  3. Defined Timelines for Registration Processing:
    • Section 9 mandates the issuance of certificates within 60 days of application receipt, providing more clarity than the NGO Act.
  4. Reduced Administrative Discretion in Registration:
    • The Act requires the Authority to notify applicants in writing if their application is unsatisfactory, detailing reasons and providing up to 30 days to comply, promoting transparency compared to the NGO Act.
  5. Establishment of the Public Benefit Organization Disputes Tribunal:
    • Section 50 creates the Tribunal to handle complaints and appeals related to the Act, offering a non-judicial resolution mechanism.
  6. Formation of Self-Regulation Forums:
    • Section 20 allows organizations to form forums for self-regulation, tasked with developing and enforcing conduct standards.
  7. Creation of the National Federation of Public Benefit Organizations:
    • This Federation serves as an umbrella entity for registered PBOs and self-regulation forums, monitoring performance and advising the Authority.
  8. Provision of Government Support:
    • The Second Schedule outlines government support including tax exemptions, incentives for donations, direct financing, preferential public procurement treatment, and access to training.

Potential Challenges Under the PBO Act:

  1. Complex Registration Process:
    • The detailed requirements in Section 8 may result in a lengthy and complex registration process.
  2. Uncertain Registration Costs:
    • The registration fee is yet to be prescribed, adding uncertainty to the registration costs.
  3. Tedious Financial Reporting Requirements:
    • Section 30’s requirement for maintaining proper books and preparing annual statements with independent auditor opinions could be burdensome.
  4. Notification of Organizational Changes:
    • Section 8(8) requires notification to the Authority within 60 days of changes in membership, governing body, or constitution, which may be tedious for organizations.

We hope this overview clarifies the implications of the Public Benefit Organizations Act, 2013. For specific legal advice or further information on compliance, please contact us at info@wka.co.ke or visit our website wakilihub.co.ke/. You can also reach us at +254 798 03 580 or visit our Nairobi Hub at Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road.

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Property Fiasco of 100 Investors Losing Their Investments in Greatwall Apartments, Athi River, Kenya

Behind the Headlines: The Encumbered Property Fiasco at Greatwall Apartments, Athi River, Kenya

Purchasers of 100 units at Greatwall Apartments in Athi River, Kenya, have lost their investments due to buying encumbered units. Erdemann Properties Limited sought a temporary injunction in the High Court and the Court of Appeal to prevent KCB Bank from selling the charged apartments at a public auction to recover the debt owed to it. However, both courts denied the request and refused to classify the third-party buyers as “innocent purchasers for value.” Consequently, KCB is authorized to exercise its statutory power of sale.

The Erdemann case parallels the landmark cases of Torino Enterprises Ltd vs. Attorney General (SC Petition No.5 (E0060) of 2022) and Dina Management Limited vs. The County Government of Mombasa & 5 Others (Petition 8 (E010) of 2021). These cases established that purchasers must conduct thorough due diligence (#BuyerBeAware) to identify all encumbrances on the title and ensure they obtain a valid property title. With many Kenyans viewing engaging qualified advocates as an unnecessary expense, such unfortunate situations are likely to increase.

Trial Court: In Brief

Application for a Temporary Injunction in Civil Suit E209 of 2022 Between Erdemann Properties Limited v. KCB Bank Limited

On June 6, 2022, Erdemann Properties Limited filed a Notice of Motion in the High Court of Kenya seeking a temporary injunction to prevent KCB Bank Limited from selling 100 apartment units at a public auction pending the hearing and determination of the suit.

Erdemann, a real estate developer, had obtained loans totaling Kshs. 1.84 billion from KCB to finance the construction of 2,190 apartment units on land registered as LR No 27317/2. The security for these loans included a legal charge over properties Title No. IR 202852 LR 209/22016 and a deed of assignment of project receivables.

Erdemann met its loan repayment obligations until March 12, 2020, when its operations were affected by the COVID-19 pandemic. The loans were restructured, with further securities including a legal charge of Ksh. 425,750,000 on 100 unsold units on LR No 27317/2. Despite this, Erdemann sold the charged units to unsuspecting purchasers, contrary to the terms of the charge, which required all proceeds from sales to be deposited into a designated escrow account.

In its Notice of Motion, Erdemann argued that KCB’s statutory notices to sell the 100 units, despite their sale to innocent purchasers, would defeat the purchasers’ rights. Erdemann offered alternative security to KCB, asserting it was fair to nullify the charge on the 100 units for the benefit of the innocent purchasers.

KCB contended that Erdemann breached the charge terms by selling the 100 units without consent and failing to deposit proceeds into the escrow account. Thus, the sale was unlawful, and the purchasers did not qualify as innocent purchasers for value. KCB argued it had the right to exercise the power of sale due to Erdemann’s loan default, amounting to Kshs. 2 billion.

The Court’s Determination

The Court’s primary consideration was whether Erdemann had established a case for a temporary injunction, guided by the principles in Giella v. Cassman Brown & Co Ltd [1973] EA 358:

  1. The applicant must show a prima facie case with a probability of success.
  2. An interlocutory injunction will not normally be granted unless the applicant might otherwise suffer irreparable harm not adequately compensated by damages.
  3. If in doubt, the court will decide on the balance of convenience.

The Court found Erdemann failed to remit sales proceeds to KCB or the escrow account. It ruled Erdemann had not shown a prima facie case with a probability of success and that any harm could be compensated by damages. The application for a temporary injunction was dismissed with costs to KCB. Erdemann appealed the decision.

Civil Application No. E042 of 2024 Between Erdemann Properties Limited v. KCB Bank Limited at the Court of Appeal

Erdemann’s appeal centered on the argument that purchasers of the 100 units and 281 off-plan units were innocent purchasers for value, and KCB’s intended sale was illegal. The Court of Appeal determined whether a temporary injunction should be issued pending the appeal.

The Court stated that for a temporary injunction to succeed, the appeal must be arguable and not frivolous, and the injunction must prevent the appeal from being rendered nugatory. The Court found the appeal arguable but not likely to be rendered nugatory, as the respondent could compensate the applicant. Therefore, the application was dismissed with costs to KCB.

Conclusion

Both superior courts did not declare the purchasers of the encumbered units as innocent purchasers for value. Therefore, KCB Bank is free to exercise its statutory power of sale to recover Erdemann Properties Limited’s debt. These purchasers may either vacate the apartments or repurchase them from KCB Bank, resulting in a significant loss.

All purchasers in real estate transactions should conduct thorough due diligence through their advocates to ensure the property is free from encumbrances. Precedents set by the Torino case and the Dina Management case place the burden of proving the legality and validity of the title on the purchasers (#BuyerBeAware). Engaging experts such as advocates can prevent losing investments to fraudsters and creditors.

At WKA Advocates, our dedicated Real Estate, Conveyancing, and Construction Law department is here to assist with due diligence and legal support. For any property-related interests, contact us for thorough assistance.

For further information or legal assistance, please contact us at info@wka.co.ke, visit wakilihub.co.ke/, or call +254 798 03 580. Our Nairobi Hub is located at Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road.

Authors:

  • William Karoki, Founding Partner
  • Florence Mwende, Associate
  • Erick Karangatha, Candidate Attorney
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immigration

DUAL CITIZENSHIP IN KENYA

Kenya: Dual Citizenship

Happy New Year to our esteemed readers! Welcome to our first newsletter of 2024. We hope your holidays were filled with joy, relaxation, and meaningful moments with loved ones. As we resume our regular programming, we are committed to delivering engaging and informative content that aligns with your interests and needs. Thank you for being a valued part of our community. Your continued support and readership inspire us to strive for excellence in every piece we present. In case you missed our newsletters for 2023, you can find them here.

Can Persons Who Lost Their Citizenship Due to Acquiring Another Citizenship Under the Repealed Constitution Regain It Under the 2010 Constitution?

YES. Section 8(1) of the Kenya Citizenship and Immigration Act, No. 12 of 2011 (the “Immigration Act”) provides that a citizen of Kenya by birth who acquires the citizenship of another country shall be entitled to retain Kenyan citizenship, subject to the provisions of the Immigration Act and the limitations relating to dual citizenship prescribed in the Constitution of Kenya, 2010.

In 1998, Kenya embarked on a constitutional review process, completed in 2010 through a referendum where 68.55% of voters supported adopting the new draft. The constitutional provisions on citizenship were operationalized by the Kenya Citizenship and Immigration Act, 2011, and its subsidiary regulations, thus repealing the Kenya Citizenship Act and the Kenya Immigration Act, among others.

Therefore, the Constitution of Kenya introduced a new citizenship regime. Persons who had lost their citizenship due to acquiring another country’s citizenship under the repealed constitution can now regain their citizenship by registering for dual citizenship.

Legal Precedents

In Miguna Miguna v Fred Okengo Matiang’i Cabinet Secretary, Ministry of Interior and Coordination of National Government & 6 others; Kenya National Commission on Human Rights (Interested Party) [2018] eKLR, the High Court held that:

“Miguna Miguna was born a citizen of Kenya in Nyando, along the shores of Lake Victoria in what is now called Kisumu County. His parents were also citizens of Kenya by birth. The Petitioner grew up as a citizen and attended local schools. After his High School education, he joined the University of Nairobi but at some point, he had a brush with the then government of President Moi and fled the country, ending up exiled in Canada, where he eventually acquired a Canadian passport. This was after his efforts to obtain a Kenyan passport failed. He later returned to Kenya, renewed his Kenyan Identity Card, and acquired a Kenyan Passport, showing he was born a citizen of Kenya. He even served as a senior adviser in the Prime Minister’s office and ran for elective posts in Kenya.”

The court concluded that the Petitioner did not lose his Kenyan citizenship by acquiring a Canadian passport. Article 14(5) provides that a citizen by birth who had lost citizenship by acquiring another country’s citizenship is entitled, upon application, to regain the lost citizenship.

Regaining Citizenship

The High Court of Kenya clarified that regaining citizenship under the new constitution is not automatic but a legal process. Applicants must follow the prescribed procedure to be issued citizenship documents such as a passport or ID. If there is undue delay in issuing the certificate of regaining citizenship, the court can mandate the issuance of the certificate and identification documents, interpreting the delay as an infringement of one’s rights as a citizen.

To Register for Dual Citizenship, the Applicant Should:

  1. Submit an application to the Cabinet Secretary in the prescribed manner (Duly completed application Form 1).
  2. Provide proof of previous Kenyan citizenship (Certificate of birth) and proof of citizenship of the other country.
  3. Submit 2 passport photos.
  4. Pay the prescribed fee.

Upon verifying the documents, the Cabinet Secretary issues a certificate of regaining Kenyan citizenship. Dual citizenship is permitted under the Constitution of Kenya, allowing the applicant to maintain the second country’s citizenship.

Disclosure Requirements

Section 8(3) of the Immigration Act requires every dual citizen to disclose their other citizenship within 3 months of becoming a dual citizen. Failure to disclose dual citizenship in the prescribed manner is an offense, punishable by a fine not exceeding five million shillings or imprisonment for up to three years or both.

Dual citizens are entitled to a passport and other travel documents and enjoy the rights of citizens, but must not use dual citizenship to gain unfair advantage or commit a crime. They owe allegiance to and must abide by the laws of Kenya.

We hope this information helps you understand Kenya’s citizenship and immigration laws. Please note that this newsletter provides a general guide and should not be relied upon without legal advice.

For further information or legal assistance, please contact us:

  • Email: info@wka.co.ke
  • Website: wakilihub.co.ke/
  • Phone: +254 798 03 580
  • Address: Nairobi Hub, Parklands, Valley View Business Park, 6th Floor, City Park Drive, Off Limuru Road

Authors:

  • William Karoki, Founding Partner
  • Florence Mwende, Associate