Doing Business 2020 Kenya Economy Profile Kenya Page 1 Doing Business 2020 Kenya Economy Profile of Kenya Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Kenya About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Kenya Ease of Doing Business in Region Sub-Saharan Africa DB RANK DB SCORE Kenya Income Category Lower middle income 56 Population 51,393,010 73.2 City Covered Nairobi Rankings on Doing Business topics - Kenya 4 1 50 70 89 94 105 117 129 134 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 82.7 67.6 80.1 53.8 95.0 92.0 72.8 67.4 58.3 62.4 Starting a Business (rank) 129 Getting Credit (rank) 4 Trading across Borders (rank) 117 Score of starting a business (0-100) 82.7 Score of getting credit (0-100) 95.0 Score of trading across borders (0-100) 67.4 Procedures (number) 7 Strength of legal rights index (0-12) 11 Time to export Time (days) 23 Depth of credit information index (0-8) 8 Documentary compliance (hours) 19 Cost (number) 22.4 Credit registry coverage (% of adults) 0.0 Border compliance (hours) 16 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 36.4 Cost to export Documentary compliance (USD) 191 Dealing with Construction Permits (rank) 105 Protecting Minority Investors (rank) 1 Border compliance (USD) 143 Score of dealing with construction permits (0-100) 67.6 Score of protecting minority investors (0-100) 92.0 Time to export Procedures (number) 16 Extent of disclosure index (0-10) 10.0 Documentary compliance (hours) 60 Time (days) 159 Extent of director liability index (0-10) 10.0 Border compliance (hours) 194 Cost (% of warehouse value) 2.8 Ease of shareholder suits index (0-10) 9.0 Cost to export Building quality control index (0-15) 10.0 Extent of shareholder rights index (0-6) 6.0 Documentary compliance (USD) 115 Extent of ownership and control index (0-7) 6.0 Border compliance (USD) 833 Getting Electricity (rank) 70 Extent of corporate transparency index (0-7) 5.0 Score of getting electricity (0-100) 80.1 Enforcing Contracts (rank) 89 Procedures (number) 3 Paying Taxes (rank) 94 Score of enforcing contracts (0-100) 58.3 Time (days) 97 Score of paying taxes (0-100) 72.8 Time (days) 465 Cost (% of income per capita) 615.4 Payments (number per year) 24 Cost (% of claim value) 41.8 Reliability of supply and transparency of tariff index (0-8) 5 Time (hours per year) 180 Quality of judicial processes index (0-18) 9.0 Total tax and contribution rate (% of profit) 37.2 Registering Property (rank) 134 Postfiling index (0-100) 62.0 Resolving Insolvency (rank) 50 Score of registering property (0-100) 53.8 Score of resolving insolvency (0-100) 62.4 Procedures (number) 10 Recovery rate (cents on the dollar) 31.8 Time (days) 43.5 Time (years) 4.5 Cost (% of property value) 5.9 Cost (% of estate) 22.0 Quality of the land administration index (0-30) 15.0 Outcome (0 as piecemeal sale and 1 as going 1 concern) Strength of insolvency framework index (0-16) 14.5 Page 4 Doing Business 2020 Kenya Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. • Procedure is considered completed once final document is -Is managed by one local director. received -Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Kenya Starting a Business - Kenya Standardized Company Legal form Private Company Paid-in minimum capital requirement No minimum City Covered Nairobi Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Procedure – Men (number) 7 7.4 4.9 1 (2 Economies) Time – Men (days) 23 21.5 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 22.4 36.3 3.0 0.0 (2 Economies) Procedure – Women (number) 7 7.5 4.9 1 (2 Economies) Time – Women (days) 23 21.6 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 22.4 36.3 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 9.3 7.6 0.0 (120 Economies) Figure – Starting a Business in Kenya – Score 64.7 77.4 88.8 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Kenya and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 94.5: Mauritius (Rank: 20) 93.2: Rwanda (Rank: 35) 82.7: Kenya (Rank: 129) 80.1: Regional Average (Sub-Saharan Africa) 76.2: Botswana (Rank: 159) 72.2: Namibia (Rank: 165) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Kenya Figure – Starting a Business in Kenya – Procedure, Time and Cost Time (days) Cost (% of income per capita) 14 20 12 Cost (% of income per capita) 10 15 Time (days) 8 10 6 4 5 2 0 0 1 2 3 4 *5 *6 *7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Kenya Details – Starting a Business in Kenya – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Reserve a unique company name using the eCitizen Portal 2 days on average KES 100 (name Agency : Business Registration Service (eCitizen portal) reservation fee) + KES 50 The name reservation is regulated by the Companies Act 2015 (Part V, Section 48). As of (convenience fee) December 2016,the Business Registration Service has made it easier for applicants to reserve company names by making it mandatory to use the online name reservation system on eCitizen. Applicants can search and reserve company names online at https://ag.ecitizen.go.ke/index.php/forms/view?id=463. After an applicant submits the name search and reservation application, they make payment via mobile money and receive a confirmation of the name reservation within the same day. The name is reserved for 30 days and can be extended to a maximum period of 60 days from the time of reservation. 2 Apply for company registration, PIN, NSSF and NHIF through the online eCitizen portal 14 days on average KES 10,000 (registration Agency : Business Registration Service (eCitizen portal) fee) + KES 600 (CR2 or An applicant is required to submit the application for registration of a company on the eCitizen company search fee) + platform by entering details of the required information in the fields provided. The Applicant has an KES 50 (convenience fee) option of adopting the model Articles of Association provided under the Companies Act 2015. The applicant may also supplement or modify the model Articles of Association and provide these for purposes of registering the company. Payment for the registration of the company is also made online using the stipulated payment methods that include mobile money payment, debit/credit/prepaid cards, local bank transfer and E-citizen agents. Once payment is made, the following forms are generated by the online system: a. Details of the First Directors, Secretary and Authorized Signatory of the Company-This form needs to be signed by all the first directors, secretary and authorized signatory of the company b. Form CR 2 (Memorandum and Articles of Association)-This form is to be signed by all the subscribers to the shares of the company c. Form CR 8 (Notice of Residential Address/Change of Address of Director of a Company)-This form is to be signed by the applicant d. Statement of Nominal Capital-This is to be signed by any of the first directors of the company. The forms should be downloaded and signed as required and scans of the signed forms should be uploaded into the system. The application for registration of the company shall be considered complete when all the above mentioned forms are scanned back into the system. The application shall then be reviewed by the Registry officials and if it is in order, a Certificate of Incorporation together with an Official Search shall be generated online. According to the Official Gazette Notice Legal 61 published April 2016, there is a flat fee of 10,000 shillings for new company incorporation. The fee for using the online system is currently 50 shillings and the fee for completing the check at the end of the incorporation process is 600 shillings. 3 Register for VAT and Pay As You Earn (PAYE) Income Tax 2 days no charge Agency : Kenya Revenue Authority (KRA) Companies must register for VAT and with the Pay As You Earn (PAYE) Income Tax. Section 34 of the VAT Act 2013 requires that any person who in the course of a business has made or is expecting to make taxable supplies the value of which is KES 5,000,000 or more in any period of twelve months must be registered for VAT. Registration is conducted online through KRA online services portal;htt.www.kra.g.ke/portal. Once the company is registered, they are required by the VAT Law to display the registration certificate in a clearly visible place within the business premises. Failing to do so will result in a default penalty of Kenya shillings 20,000 and in addition the company shall be guilty of an offence and liable to a fine not exceeding Kenya shillings 200,000 or imprisonment for a term not exceeding two years, or both. Under the Income Tax Act Cap 470, where a person has employees, they are required to deduct tax due from any remuneration paid to their employees (PAYE tax) and remit this to the Revenue Authority (KRA). All employers are thus required to register for PAYE once they have employees. The applications for VAT and PAYE can be both completed at the same time. Page 8 Doing Business 2020 Kenya 4 Apply for a unified business permit 5 days see procedure details Agency : Nairobi City County The Nairobi City County has introduced the new unified business permit online in order to make it easier and simpler for applicants to obtain the unified business permit. The unified business permit consolidates 5 permits i.e. the single business permit, fire clearance certificate, advertising signage, health certificate and food hygiene into one permit. Applicants apply for a unified business permit online at, https://epayments.nairobi.go.ke/sbp/reg_new with an option to make payments online. An assessment of the payable fee for the trading licence can only be done at the agency. Only after the assessment has been done can an invoice be generated and paid online. The applicant can also go in person to submit the application for the unified permit. The applicant then obtains the provisional unified business permit and can display it at their business premises. Cost: KES 15,000 single business permit fee (varied fees based on the size, type of business and number of employees) KES 200 for the application fee KES 4,500 for the inter alia a Fire Clearance Certificate 5 Register with the National Industrial Training Authority (NITA) 3 days, simultaneous no charge Agency : National Industrial Training Authority (NITA) Through Legal Notice No. 113 of 2007, it became a mandatory requirement for all employers to register and contribute to the industrial training levy (charged at KES 50 per employee per month). The applicant must complete the application form and attach the necessary documents. The supporting documents are as follows: 1 the employer’s KRA PIN Certificate; and 2 the employer’s Certificate of Incorporation. There is no application fee for registration with NITA. The application and supporting documents are submitted to the NITA physically at the NITA headquarters in Nairobi. All documents submitted along with the application form shall be certified by NITA as true copies of originals. 6 Make a company seal 2 days, simultaneous between KES 2,500 and Agency : Seal maker KES 3,500 The requirement for companies to obtain a company seal has been made optional as a result of passing the Companies Act, 2015. However, in practice companies still get seals made. Seal makers request a copy of the certificate of incorporation in order to make a company seal. 7 Register the workplace with the Directorate of Occupational Safety and Health Services 1 day, simultaneous KES 5,000 Agency : Directorate of Occupational Safety and Health Services (DOSHS) The purpose of the Occupational Safety and Health Act 2007 is to provide a legal framework to promote, stimulate and encourage high standards of safety and health in the workplace. As such employers must: • Prepare and, revise a written safety and health policy statement for the workplace giving consideration to the organisation and arrangements for carrying out that policy; • Notify employees any revision of the policy statement; • To establish a safety and health committee in the workplace where there are twenty or more persons employed in the workplace; • not to penalize an employee who is a member of a work place safety and health committee for doing anything in pursuit of safety and health; A company must obtain a Certificate of Registration of a Workplace from the Directorate of Occupational Health and Safety Services in respect of each of the premises used by the company as a workplace. Takes place simultaneously with previous procedure. Page 9 Doing Business 2020 Kenya Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule The warehouse: • Procedure is considered completed once final document is - Will be used for general storage activities, such as storage of books or stationery. received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage • Quality control after construction (0-3) infrastructure, a septic tank in the smallest size available will be installed or built. - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2020 Kenya Dealing with Construction Permits - Kenya Standardized Warehouse Estimated value of warehouse KES 8,611,903.70 City Covered Nairobi Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Procedures (number) 16 15.1 12.7 None in 2018/19 Time (days) 159 145.4 152.3 None in 2018/19 Cost (% of warehouse value) 2.8 8.9 1.5 None in 2018/19 Building quality control index (0-15) 10.0 8.9 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Kenya – Score 56.0 61.7 86.1 66.7 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Kenya and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 85.8: Mauritius (Rank: 8) 75.6: Botswana (Rank: 44) 70.6: Rwanda (Rank: 81) 70.0: Namibia (Rank: 84) 67.6: Kenya (Rank: 105) 58.5: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 11 Doing Business 2020 Kenya Figure – Dealing with Construction Permits in Kenya – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 2.5 140 Cost (% of warehouse value) 2 120 Time (days) 100 1.5 80 1 60 40 0.5 20 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 * 14 15 16 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 12 Doing Business 2020 Kenya Figure – Dealing with Construction Permits in Kenya and comparator economies – Measure of Quality 16 15.0 14.0 14 12 10.5 Index score 10.0 10 8.5 8.9 8 6 4 2 0 Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa Details – Dealing with Construction Permits in Kenya – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a survey plan from Survey Kenya 1 day KES 500 Agency : Survey Kenya A survey plan from Survey of Kenya is a required document when applying for a building permit. 2 Obtain a project report from an environmental expert 5 days KES 50,000 Agency : Private Expert Once the survey plan has been obtained, a licensed environmental expert must be hired to prepare a project report to be submitted to NEMA. 3 Obtain approval of the environmental impact study 30 days KES 10,000 Agency : National Environment Management Authority (NEMA) Following the enactment of new Environmental Management and Co-ordination Act on February 27, 2009, companies now have to obtain approval of projects from the National Environment Management Authority. Projects of all risk categories are subject to approval and an environmental impact assessment (EIA), including the BuildCo warehouse. It takes 30 days on average. EIA fees has been eliminated effective from January 2017 4 Submit and obtain approval of the architectural plans 45 days KES 166,563 Agency : Nairobi City County - Development Control Section The structural engineer submits all the structural and architectural drawings to be approved using an online platform https://ccn-ecp.or.ke/. The required documents to be submitted are the following: i. The proposed development; ii. A survey plan from Survey of Kenya; iii. Ownership documents iv. Up-to-date rates payment receipts. v. Structural plans The City Council will issue an invoice that must be paid, this can take up to 2—3 weeks to be obtained. The drawings are reviewed by all relevant departments simultaneously. Once the structural and architectural drawings are approved, they will be signed on by the governor of Nairobi. When all signatures have been obtained, the approved plans are scanned and uploaded in the system so that they can be retrieved by the architect. On June 27, 2013 the Nairobi City County adopted the new Financial Act 2013 which became effective as of October 1, 2013. The Act modified the method of assessing the building permit fees and consolidated several costs into one. The building permit fee is now based on the size of the building. The Joint Building Council Rates provide the estimated cost per square meter which varies depending on the type of building (e.g. office block, residential, industrial complex, etc.). For the Doing Business case study, the estimated cost is KES 21,000 / sq. m. The fees are as follows: (i) Building plan approval fee: 1% of the estimated cost of construction (ii) Construction sign board fee: KES 25,000 (iii) Application fee: KES 5,000 (iv) Inspection of building file: KES 5,000 (v) Occupation certificate: KES 5,000 5 Submit and obtain approval of the structural plans 10 days no charge Agency : Nairobi City County - Development Control Section When construction is about to commence, the Contractor will apply for a construction permit. However, with approved drawings construction may start while the application for a building permit is being processed. BuildCo must have the following items approved: project plans, architectural drawings, location survey of property documents and others. Page 13 Doing Business 2020 Kenya 6 Obtain stamps on architectural and structural plans from the Nairobi City County - 1 day no charge Development Control Section Agency : Nairobi City County - Development Control Section Once the plans have been approved, the architect must submit hard copies of the plans to be stamped by the Nairobi City County, even after submitting the documents online. The engineer must also do the same after the architect's plans have been stamped. The engineer does not have to wait one month like the architect to bring in the hard copies. 7 Apply and received the Project Registration Certificate from the National Construction 7 days no charge Authority (NCA) Agency : National Construction Authority (NCA) BuildCo has to register the proposed construction project with the National Construction Authority (NCA) and fill a project registration form providing details of the construction work (that can be downloaded from the NCA website since 2012, www.nca.go.ke). This is line with the adoption of the National Construction Authority Regulations (2014) that mandate contractors to register their construction projects and obtain compliance certificate from NCA before construction. It takes around a week to obtain the compliance certificate. Upon submission of the application, BuildCo receives a temporary certificate that testifies the registration is under process. Most of the time, construction companies start building just after submission at NCA without waiting to receive the compliance certificate as they should be doing. NCA conducts periodic inspections during the construction looking for registration certificates and structural flaws. NCA ensures that the safety of the workers on site and the general public is respected. BuildCo submits the project registration form to the authority with several documents listed below. BuildCo is issued with an invoice on the amount of levy it should pay the authority at selected bank accounts, which are posted on the NCA website. The levy is 0.5% of the total cost of the project (percentage applicable to projects with a value of over KES 5,000,000). The following documents must be provided for the registration application 1. Authenticated architectural plans (original) 2. Authenticated structural plans (original) 3. Nema approval (Simple copy) 4. Bill of quantities (Simple copy) 5. contract/agreement (Simple copy) It should be duly signed by both the contractor and the client 6. Contractor's registration certificate (Simple copy) 7. Quantity surveyor's practicing certificate (Simple copy) 8. Architect's practicing certificate (Simple copy) 9. Engineer's practicing certificate (Simple copy) 8 Notify the Nairobi City Council of commencement of work 1 day no charge Agency : Nairobi City Council According to the Planning and Building Regulations 2009 - Volume I- Section A-101, AA 54, BuildCo must complete a form to notify the Nairobi City Council of the commencement of work. 9 Request and receive set out inspection 1 day no charge Agency : Nairobi City County - Development Control Section According to the Planning and Building Regulations 2009 - Volume I - A-102, AA 55, BuildCo must complete a form and request an inspection from the Building Control Section. 10 Request and receive foundation excavation inspection 1 day no charge Agency : Nairobi City County - Development Control Section According to the Planning and Building Regulations 2009 - Volume I- Section A-103, AA 56, the Development Control Section of the Nairobi City Council must be informed that the foundation /excavation is complete and request an inspection by completing a form and submitted it. 11 Apply for permit to connect to the city sewage system 7 days KES 7,500 Agency : Nairobi City County - Development Control Section According to the Planning and Building Regulations 2009 - Volume 1, Section A-110, AA 63, a permit to connect to the City sewage system. It will take about a week to obtain the permission. 12 Request and receive final inspection by the Municipal Authority after construction 5 days no charge Agency : Nairobi City County - Development Control Section Once the construction is completed alongside statutory inspections, BuildCo applies for an occupancy certificate. The Structural engineer will file a form AA65, according to the Planning and Building Regulations 2009, certifying that the "that the structural work of the building mentioned below has been carried out as per my structural design and details and that the said structure is safe and stable for the purpose for which it is intended". This certificate is issued to completed developments that have complied to all approval conditions and have undergone the regular inspections at the required stages. The application has to be accompanied by:Copy of approved building plans; Copy of approved structural plans; Structural Engineer’s indemnity form; Architect’s report; Plumbers certificate; and Kenya Bureau of Statistics form duly filled. The occupancy certificate is given when the City Council deems the building is in compliance with the approved architectural drawings. The application is then forwarded to the Assistant Director Enforcement so that an inspector is assigned for the final inspection of the construction. Normally it should be a combined visit from several other departments. Page 14 Doing Business 2020 Kenya 13 Obtain occupancy certificate 14 days no charge Agency : Nairobi City County - Development Control Section Apply for water connection 1 day KES 5,000 14 Agency : Nairobi City Water and Sewerage Company (NairobiWater) BuildCo is required to submit an "application for water and sewerage supply form" obtained from the Nairobi City Water and Sewerage Company. Afterwards, BuildCo is required to pay KES 5000 for a survey and estimate of fees and attach the receipt of payment to the application form. BuildCo must also attach the company's certificate of registration and its PIN number. The Nairobi Water Company may approve the application after all these documents have been submitted. Two to three weeks after the application has been received Nairobi City Water and Sewerage Company will send a team to assess the connection cost. The final connection will be made once payment of the estimated connection cost has been paid and this will take about 2—3 weeks to be done. 15 Receive inspection for assessment of connection fees 1 day no charge Agency : Nairobi City Water and Sewerage Company (NairobiWater) Once an application has been submitted by BuildCo, an inspector will visit the property to make a cost assessment for labor and materials for the connection. This inspection will happen in about 2- -3 weeks. 16 Obtain water connection 30 days no charge Agency : Nairobi City Water and Sewerage Company (NairobiWater) Takes place simultaneously with previous procedure. Page 15 Doing Business 2020 Kenya Details – Dealing with Construction Permits in Kenya – Measure of Quality Answer Score Building quality control index (0-15) 10.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 1.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer; Unscheduled inspections; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 0.0 inspections are not done in practice during construction. Quality control after construction index (0-3) 2.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency. Do legally mandated final inspections occur in practice? (0-1) Final inspection does 0.0 not always occur in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use No party is held liable 0.0 (Latent Defect Liability or Decennial Liability)? (0-1) under the law. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Being a registered architect or engineer; Passing a certification exam. What are the qualification requirements for the professional who supervises the construction on the ground? (0- Minimum number of 2.0 2) years of experience; University degree in engineering, construction or construction management; Being a registered architect or engineer; Passing a certification exam. Page 16 Doing Business 2020 Kenya Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours • Tools to monitor power outages (0–1) (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. • Regulatory monitoring of utilities’ performance (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 17 Doing Business 2020 Kenya Getting Electricity - Kenya Standardized Connection Name of utility Kenya Power and Lighting Co. Ltd Price of electricity (US cents per kWh) 21.7 City Covered Nairobi Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Procedures (number) 3 5.2 4.4 3 (28 Economies) Time (days) 97 109.6 74.8 18 (3 Economies) Cost (% of income per capita) 615.4 3,187.5 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 5 1.6 7.4 8 (26 Economies) Figure – Getting Electricity in Kenya – Score 100.0 65.7 92.4 62.5 Procedures Time Cost Reliability of supply and transparency of tariff index Figure – Getting Electricity in Kenya and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 88.0: Mauritius (Rank: 28) 82.3: Rwanda (Rank: 59) 80.1: Kenya (Rank: 70) 78.3: Namibia (Rank: 76) 59.5: Botswana (Rank: 139) 50.4: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Kenya – Procedure, Time and Cost Time (days) Cost (% of income per capita) 700 600 Cost (% of income per capita) 80 500 Time (days) 60 400 40 300 200 20 100 0 0 1 2 3 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 18 Doing Business 2020 Kenya reflected here, see the summary below. Figure – Getting Electricity in Kenya and comparator economies – Measure of Quality 7 6 6 6 6 5 5 Index score 4 3 2 1.6 1 0 0 Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa Page 19 Doing Business 2020 Kenya Details – Getting Electricity in Kenya – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application to Kenya Power and Lighting Company (KPLC) and await quotation 21 calendar days KES 0 Agency : Kenya Power and Lighting Company Ltd The client submits the following documents: • Inquiry for supply of electricity form –Collected from KPLC and duly filled out • Copy of Certificate of registration • Copy of PIN Certificate • Sketch Map to the Premises • Permit from city council to show that the land is occupied legally and structure is correctly done and approved by city council KPLC locates the building using GIS technology and looks at some key aspects that determine the price estimate that the client will receive, and prepares estimate. • Amount of power required for the building. • Existing infrastructure (Poles and transformers) and their proximity to the premises. It is important to note that if the premise is within 600m of existing infrastructure, this considerably lowers the cost. • Way leaves clearance –Pathways for laying down infrastructure and any permits or notifications needed to facilitate this. 2 Pay estimate and sign supply contract 1 calendar day KES 1,060,000 Agency : Kenya Power and Lighting Company Ltd Connection costs include capital contribution charges for network reinforcement for up to 1000 meters. Customer fills in the Supply Contract form and submits to the Meter Installation section through the customer service department. Customer also submits internal wiring clearance certificate from electrician. 3 Receive external works, meter installation and electricity flow 75 calendar days KES 0 Agency : Kenya Power and Lighting Company Ltd External connection works are done by Distribution Department, and while reaching completion, they inform the Meter Installation Section in Customer Service Department to complete metering. Takes place simultaneously with previous procedure. Page 20 Doing Business 2020 Kenya Details – Getting Electricity in Kenya – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 5 Total duration and frequency of outages per customer a year (0-3) 1 System average interruption duration index (SAIDI) 12.0 System average interruption frequency index (SAIFI) 6.9 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 1.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? No Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online https://kplc.co.ke/content/i tem/691/electricity-tarrifs Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 21 Doing Business 2020 Kenya Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. • Reliability of infrastructure index (0-8) - Has no occupants, and no other party holds a legal interest in it. • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 22 Doing Business 2020 Kenya Registering Property - Kenya Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Procedures (number) 10 6.1 4.7 1 (5 Economies) Time (days) 43.5 51.6 23.6 1 (2 Economies) Cost (% of property value) 5.9 7.3 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 15.0 9.0 23.2 None in 2018/19 Figure – Registering Property in Kenya – Score 25.0 79.7 60.5 50.0 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Kenya and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 93.7: Rwanda (Rank: 3) 82.5: Mauritius (Rank: 23) 65.8: Botswana (Rank: 82) 53.8: Kenya (Rank: 134) 53.6: Regional Average (Sub-Saharan Africa) 40.6: Namibia (Rank: 173) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 23 Doing Business 2020 Kenya Figure – Registering Property in Kenya – Procedure, Time and Cost Time (days) Cost (% of property value) 4.5 40 4 Cost (% of property value) 35 3.5 30 3 Time (days) 25 2.5 20 2 15 1.5 10 1 5 0.5 0 0 1 *2 *3 *4 5 6 7 8 9 10 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 24 Doing Business 2020 Kenya Figure – Registering Property in Kenya and comparator economies – Measure of Quality 35 30 28.5 25 Index score 22.5 20 15.0 15 10.5 10.0 10 9.0 5 0 Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa Details – Registering Property in Kenya – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain Land Rent Clearance Certificate 7 days no charge Agency : Lands Office (through ecitizen.go.ke) The seller's lawyer obtains the Land Rent Clearance Certificate from the lands office. It is possible to pay for any outstanding taxes and receive the clearance certificate through the e-Citizen online platform. Once the applicant paid all the taxes, the system will generate the Land Rent Clearance Certificate digitally. 2 Obtain Rates Clearance Certificate from the Nairobi City Council 5 days KES 10,000 Agency : Nairobi City County Government The seller's lawyer obtains the Rates Clearance Certificate from the Nairobi City County Government. This certificate is important proof that there are no outstanding fees to be paid to the Nairobi City County Government. 3 Draft the transfer instrument and file it at the Lands Office to obtain an appointment for 4 days KES 154,178.54; valuation (According to the Agency : Lawyer's office Advocates Remuneration The transfer instrument is prepared by the buyer’s lawyer and needs to be approved by the Order for 2014 the seller’s counterpart. Lawyers' fees are calculated based on a fixed scale published under the lawyer's fee is calculated Advocates (Remuneration) Order depending on the value of the property. Lawyers are also cumulatively, based on the permitted to charge on alternative billing methods subject to the minimum fees set out under the property's value: scaled provided for under the Advocates (Remuneration) Order. The transfer instrument is filed at the Land office to be assessed for Stamp duty. (i) from Kshs. 1 to Kshs. 5,000,000, 2% of the consideration or the value of the subject matter or Kshs. 35,000 whichever is higher. (ii) from Kshs. 5,000,001 to Kshs.100,000,000, the fee prescribed in (i) plus 1.5% of the balance. (iii) from Kshs.100,000,001 to Kshs. 250,000,000, the fee prescribed in (ii) plus 1.25 % of the balance. (iv) from Kshs. 250,000,001 to Kshs.1,000,000,000, the fee prescribed in (iii) plus 1% of the balance (v) in respect of an amount where the consideration or value is more than Kshs.1,000,000,000, the fee set out in (iv) plus 0.1% of the balance.) Page 25 Doing Business 2020 Kenya 4 Obtain an official search on the title at the Lands Office 3 days KES 500; (KES 500 Agency : Lands Office Nairobi Registry Lawyers obtain an official title search. KES 520 Nairobi Central For titles previously registered under the Registered Land Act (Cap. 300), it is possible to obtain Registry the official search through the E-Citizen platform. KES 550 Online (E- For titles issued under the Registration of Titles Act (Cap. 281) or the Government Lands Act Citizen) (KES 50 is the (Cap. 280), an official search is obtained at the Lands Registry. convenience fee for the E- Citizen portal)) 5 Obtain consent to transfer from the Lands Office 5 days KES 1,050 Agency : Lands Office (through ecitizen.go.ke) When the Constitution of Kenya, 2010 was promulgated, the Land Registration Act (No. 3 of 2012) repealed the Government Lands Act (Cap. 280). Under the Act, for leasehold lands held by the government, the consent to transfer is required to be obtained from the lands office. The consent to transfer is requested through the E-Citizen portal. Once the applicant receives the notification from the lands office, they need to pick up the consent at the lands office. 6 Receive site inspection by a government valuer and obtain a valuation report 20 days no charge Agency : Lands Office Valuer Once the draft transfer has been filed at the land office, an inspector visits the site to verify the development and state of the property. Due to lack of transport, in practice, the inspector often has to be picked up in person and driven to the site. Previously, such inspections were conducted on a random basis, but now every transaction requires such an inspection. Once the valuer has inspected the property to assess its value, a report is compiled after which the value is endorsed on the transfer and then it is submitted for assessment of the Stamp duty. 7 Endorsement of value for stamp duty purposes and assessment of the stamp duty 4 days no charge Agency : Lands Office The stamp duty assessment form is completed including the purchase price (in quadruplet). The stamp duty assessment officer stationed at the Ministry of Lands banking hall will then assess the stamp duty payable and indicate the amount on the forms. Stamping of the document takes on average 3 days. 8 Generate a payment slip of the stamp duty Less than one day, no charge Agency : Kenya Revenue Authority online Once the stamp duty has been assessed, the buyer generates a payment slip via the iTax portal. The iTax portal is used for generating slips for the payment to Kenya Revenue Authority. Once the payment slip has been generated, the payment can be made at commercial banks. 9 Payment of the stamp duty at Commercial Bank and receive confirmation of payment from 2 days KES 344,586.15; (KES the Kenya Revenue Authority 110 (charge for Banker’s Agency : Commercial Bank check) + 4% of property The payment of Stamp Duty is made at commercial banks designated by the Ministry of Land. If value (stamp Duty)) the amount exceeds KSE 1 million, payment is made by RTGS bank transfer. It takes about 2 days for the Kenya Revenue Authority to confirm receipt of payment after which the transfer agreement can be franked or embossed evidencing payment of stamp duty. 10 Lodge stamped transfer document for registration and receive duly registered documents 5 days KES 500 Agency : Lands Office The stamped transfer documents are lodged for registration at the lands office. These documents are generally obtained from seller’s lawyers. The documents include the original Certificate of Title, Rates Clearance Certificate, Land Rent Clearance Certificate, and the Consent to Transfer. The balance of the purchase price is also paid. The certificate of the registered transfer is collected at the Lands Office. Takes place simultaneously with previous procedure. Page 26 Doing Business 2020 Kenya Details – Registering Property in Kenya – Measure of Quality Answer Score Quality of the land administration index (0-30) 15.0 Reliability of infrastructure index (0-8) 7.0 Type of land registration system in the economy: Dual system (Title & Deed) What is the institution in charge of immovable property registration? Lands Office In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Fully digital 2.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Survey of Kenya In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Fully digital 2.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Separate databases 0.0 kept in a single database, in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use the same identification Yes 1.0 number for properties? Transparency of information index (0–6) 3.0 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Only intermediaries 0.0 in the largest business city? and interested parties Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: http://www.lands.go.k e/wp- content/uploads/2018 /03/Registration-of- transfer-of-Land- revised.pdf Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable property Yes, online 0.5 registration in the largest business city made publicly available–and if so, how? Link for online access: http://www.lands.go.k e/wp- content/uploads/2018 /03/Registration-of- transfer-of-Land- revised.pdf Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: http://lands.go.ke/wp- content/uploads/2018 /03/Registration-of- transfer-of-Land- revised.pdf Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property No 0.0 registration agency? Number of property transfers in the largest business city in 2018: Page 27 Doing Business 2020 Kenya Who is able to consult maps of land plots in the largest business city? Anyone who pays the 0.5 official fee Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Link for online access: http://www.kpda.or.ke /documents/Charters/ Ministry%20of%20La nds%20and%20Physi cal%20Planning%20 Service%20Charter.p df Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and Yes, online 0.5 if so, how does it communicate the service standard? Link for online access: http://www.kpda.or.ke /documents/Charters/ Ministry%20of%20La nds%20and%20Physi cal%20Planning%20 Service%20Charter.p df Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Are all privately held land plots in the economy mapped? No 0.0 Land dispute resolution index (0–8) 5.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Land Registration Act, 2012, Registration of Titles Act cap 281, Government Land Act cap 280, Land Titles Act 282. Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Registration of Titles Act cap 281, Government Land Act cap 280, Land Titles Act 282. Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary; Lawyer; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Registrar; Notary; Lawyer; Page 28 Doing Business 2020 Kenya Is there a national database to verify the accuracy of government issued identity documents? Yes 1.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Environment and businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located Land Court in the largest business city? How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 2 and 3 1.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 29 Doing Business 2020 Kenya Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of Credit registry coverage (% of adults) movable collateral. • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 30 Doing Business 2020 Kenya Getting Credit - Kenya Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Strength of legal rights index (0-12) 11 5.1 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 3.9 6.8 8 (53 Economies) Credit registry coverage (% of adults) 0.0 8.3 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 36.4 11.0 66.7 100.0 (14 Economies) Figure – Getting Credit in Kenya – Score 95.0 Score - Getting Credit Figure – Getting Credit in Kenya and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 95.0: Kenya (Rank: 4) 95.0: Rwanda (Rank: 4) 65.0: Mauritius (Rank: 67) 60.0: Botswana (Rank: 80) 60.0: Namibia (Rank: 80) 45.2: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 31 Doing Business 2020 Kenya Figure – Legal Rights in Kenya and comparator economies 12 11 11 10 Index Score 8 6 6 5 5 5.1 4 2 0 Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa Page 32 Doing Business 2020 Kenya Details – Legal Rights in Kenya Strength of legal rights index (0-12) 11 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents Yes to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? Yes Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third Yes party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? Yes Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law No protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Kenya and comparator economies 9 8 8 8 7 7 7 7 Index Score 6 5 3.9 4 3 2 1 0 Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa Page 33 Doing Business 2020 Kenya Details – Credit Information in Kenya Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes No 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 10,380,120 0 Number of firms 330,782 0 Total 10,710,902 0 Percentage of adult population 36.4 0.0 Page 34 Doing Business 2020 Kenya Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James • Ease of shareholder suits index (0–10): Access to internal appointed 60% of the shareholder-elected members. corporate documents; Evidence obtainable during trial and - Has not adopted bylaws or articles of association that go beyond the minimum requirements. allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures • Extent of shareholder governance index (0–20): Sum of the made—that is, the transaction was not entered into fraudulently. extent of shareholders rights, extent of ownership and control - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and and extent of corporate transparency indices directors that approved the transaction. • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 35 Doing Business 2020 Kenya Protecting Minority Investors - Kenya Stock exchange information Stock exchange Nairobi Stock Exchange Stock exchange URL http://www.nse.co.ke Listed firms with equity securities 64 City Covered Nairobi Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Extent of disclosure index (0-10) 10.0 5.5 6.5 10 (13 Economies) Extent of director liability index (0-10) 10.0 3.5 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 9.0 5.5 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 6.0 1.8 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 6.0 1.4 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 5.0 1.5 5.7 7 (13 Economies) Figure – Protecting Minority in Kenya – Score 92.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Kenya and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 92.0: Kenya (Rank: 1) 78.0: Mauritius (Rank: 18) 60.0: Botswana (Rank: 72) 56.0: Namibia (Rank: 88) 44.0: Rwanda (Rank: 114) 38.5: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 36 Doing Business 2020 Kenya Figure – Protecting Minority Investors in Kenya and comparator economies – Measure of Quality Kenya 5 10 10 6 6 9 Botswana 5 8 7 3 4 3 Mauritius 5 8 7 5 5 9 Namibia 6 5 5 3 3 6 Rwanda 0 9 8 0 5 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 Sub-Saharan Africa 1.7 3.6 5.6 1.5 1.9 5.6 0 5 10 15 20 25 30 35 40 45 50 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 37 Doing Business 2020 Kenya Details – Protecting Minority Investors in Kenya – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 10.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Shareholders 3.0 excluding interested parties Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Full disclosure of all 2.0 material facts Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Extent of director liability index (0-10) 10.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if unfair or 2.0 prejudicial Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) Yes 1.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) Yes 1.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Voidable if unfair or 2.0 prejudicial Ease of shareholder suits index (0-10) 9.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) Yes 1.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 6.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0 Extent of ownership and control index (0-7) 6.0 Page 38 Doing Business 2020 Kenya Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? Yes 1.0 Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end of their term? Yes 1.0 Must the board of directors include a separate audit committee exclusively comprising board members? Yes 1.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? No 0.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Extent of corporate transparency index (0-7) 5.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other Yes 1.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? No 0.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 39 Doing Business 2020 Kenya Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the • Collecting information, computing tax payable second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, • Social contributions, labor taxes paid by employer sales and the machine and the tax reporting period is every month. Input VAT will exceed Output VAT in June 2018. • Property and property transfer taxes The corporate income tax audit process: • Dividend, capital gains, financial transactions taxes - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 40 Doing Business 2020 Kenya Paying Taxes - Kenya Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Payments (number per year) 24 36.6 10.3 3 (2 Economies) Time (hours per year) 180 280.6 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 37.2 47.3 39.9 26.1 (33 Economies) Postfiling index (0-100) 62.0 54.7 86.7 None in 2018/19 Figure – Paying Taxes in Kenya – Score 65.0 79.8 84.3 62.0 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Kenya and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 94.0: Mauritius (Rank: 5) 84.6: Rwanda (Rank: 38) 80.0: Botswana (Rank: 59) 74.5: Namibia (Rank: 88) 72.8: Kenya (Rank: 94) 57.8: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 41 Doing Business 2020 Kenya Figure – Paying Taxes in Kenya and comparator economies – Measure of Quality 120 98.3 100 82.7 Index score 77.2 80 62.0 64.6 60 54.7 40 20 0 Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa Page 42 Doing Business 2020 Kenya Details – Paying Taxes in Kenya Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Corporate 1.0 online 41.5 30% taxable profit 29.88 income tax Standards levy 1.0 online 0.2% net sales 3.54 Employer paid - 1.0 online 63.0 5% up to gross salaries 1.52 Social security KES200 per contributions person per month (NSSF) Unified Business 1.0 KES 100,000 fixed fee 1.06 Permit Tax on interest 0.0 jointly 15% interest income 0.38 included in other taxes Employer paid - 12.0 KES 50 per number of 0.38 Training or employee per employees apprentice tax month Land rates 1.0 0.6% land value 0.30 Road 0.0 jointly KES 9 per liter fuel consumption 0.28 maintenance levy Capital Gains Tax 1.0 5% capital gains 0.25 Advance motor 1.0 KES 1,500 per vehicle weight 0.24 included in other vehicle tax ton taxes Land rent 1.0 various rates 0.01 Petroleum 0.0 jointly KES 0.4 per liter fuel consumption 0.01 development duty Tax on check 1.0 KES 2 per check number of 0.01 transactions checks Stamp duty on 1.0 various rates type of contract 0.00 small amount contracts Value added tax 1.0 online 75.0 16% value added 0.00 not included (VAT) Fuel tax - excise 1.0 KES 10.31 per fuel consumption 0.00 small amount duty liter Employee paid - 0.0 jointly various rates gross salaries 0.00 withheld National hospital insurance fund (NHIF) Employee paid - 0.0 jointly 5% up to KES gross salaries 0.00 withheld Social security 200 per person contributions per month (NSSF) Totals 24 180 37.2 Page 43 Doing Business 2020 Kenya Details – Paying Taxes in Kenya – Tax by Type Taxes by type Answer Profit tax (% of profit) 30.1 Labor tax and contributions (% of profit) 1.9 Other taxes (% of profit) 5.2 Page 44 Doing Business 2020 Kenya Details – Paying Taxes in Kenya – Measure of Quality Answer Score Postfiling index (0-100) 62.0 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No, industrial machine is exempted from VAT Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT No VAT Time to obtain VAT refund (weeks) No VAT No VAT Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 25% - 49% Time to comply with a corporate income tax correction (hours) 20.5 65.1 Time to complete a corporate income tax correction (weeks) 13.1 58.9 Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 45 Doing Business 2020 Kenya Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 46 Doing Business 2020 Kenya Trading across Borders - Kenya Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Time to export: Border compliance (hours) 16 97.1 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 143 603.1 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 19 71.9 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 191 172.5 33.4 0 (20 Economies) Time to import: Border compliance (hours) 194 126.2 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 833 690.6 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 60 96.1 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 115 287.2 23.5 0 (30 Economies) Figure – Trading across Borders in Kenya – Score 90.9 86.6 89.3 52.4 30.8 30.6 75.3 83.6 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Kenya and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 86.7: Botswana (Rank: 55) 81.0: Mauritius (Rank: 72) 75.0: Rwanda (Rank: 88) 67.4: Kenya (Rank: 117) 61.5: Namibia (Rank: 138) 53.6: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 47 Doing Business 2020 Kenya Figure – Trading across Borders in Kenya – Time and Cost Time (hours) Cost (USD) 250 833 900 800 194 200 700 Time (hours) Cost (USD) 600 150 500 400 100 60 300 191 50 143 115 200 16 19 100 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 48 Doing Business 2020 Kenya Details – Trading across Borders in Kenya Characteristics Export Import Product HS 09 : Coffee, tea, matï and spices HS 8708: Parts and accessories of motor vehicles Trade partner Uganda Japan Border Malaba border crossing Mombasa port Distance (km) 440 481 Domestic transport time (hours) 9 7 Domestic transport cost (USD) 967 1100 Details – Trading across Borders in Kenya – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 11.0 122.5 customs authorities Export: Clearance and inspections required by 4.5 20.0 agencies other than customs Export: Port or border handling 2.0 0.0 Import: Clearance and inspections required by 84.0 200.0 customs authorities Import: Clearance and inspections required by 72.0 250.0 agencies other than customs Import: Port or border handling 38.0 382.5 Page 49 Doing Business 2020 Kenya Details – Trading across Borders in Kenya – Trade Documents Export Import Inland Bill of lading Bill of lading Release order Cargo release order Certificate of origin (COMESA) Pre-Import Verification of Conformity (PVoC) Commercial invoice Commercial invoice Exit note Import Declaration Form (IDF Form C-61) Certificate of export Packing list Export Declaration Proof of payments of Customs Duties Packing list Terminal handling receipts Phytosanitary certificate Declaration of customs value (Form C- 52) SOLAS certificate Page 50 Doing Business 2020 Kenya Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. Page 51 Doing Business 2020 Kenya Enforcing Contracts - Kenya Standardized Case Claim value KES 536,577 Court name Nairobi Resident Magistrates Court City Covered Nairobi Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Time (days) 465 654.9 589.6 120 (Singapore) Cost (% of claim value) 41.8 41.6 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 9.0 6.9 11.7 None in 2018/19 Figure – Enforcing Contracts in Kenya – Score 71.7 53.1 50.0 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Kenya and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 72.2: Mauritius (Rank: 20) 69.1: Rwanda (Rank: 32) 63.4: Namibia (Rank: 64) 58.3: Kenya (Rank: 89) 50.0: Botswana (Rank: 137) 49.6: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 52 Doing Business 2020 Kenya Figure – Enforcing Contracts in Kenya – Time and Cost Time (days) Cost (% of claim value) 700 660 64.6 654.9 70 Cost (% of claim value) 589.6 600 60 490 500 465 460 50 Time (days) 39.8 41.8 41.6 400 35.8 40 300 25.0 30 21.5 230 200 20 100 10 0 0 Botswana Kenya Mauritius Namibia OECD Rwanda Sub-Saharan high Africa income Page 53 Doing Business 2020 Kenya Figure – Enforcing Contracts in Kenya and comparator economies – Measure of Quality Kenya 2 2 0.5 4.5 Botswana 2 2.5 0 2.5 Mauritius 2.5 3 3 5 Namibia 2 5 2 1.5 Rwanda 2.5 5 4 4.5 OECD high income 2.5 3.2 2.4 3.6 Sub-Saharan Africa 2.2 1.3 0.3 3.2 0 2 4 6 8 10 12 14 16 18 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Kenya Indicator Time (days) 465 Filing and service 40 Trial and judgment 365 Enforcement of judgment 60 Cost (% of claim value) 41.8 Attorney fees 27.5 Court fees 11.6 Enforcement fees 2.7 Quality of judicial processes index (0-18) 9.0 Court structure and proceedings (-1-5) 4.5 Case management (0-6) 2.0 Court automation (0-4) 0.5 Alternative dispute resolution (0-3) 2.0 Page 54 Doing Business 2020 Kenya Details – Enforcing Contracts in Kenya – Measure of Quality Answer Score Quality of judicial processes index (0-18) 9.0 Court structure and proceedings (-1-5) 4.5 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, but manual 0.5 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 2.0 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) No 0.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? Yes 1.0 5. Are there any electronic case management tools in place within the competent court for use by judges? No 0.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? No 0.0 Court automation (0-4) 0.5 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.5 4.a Are judgments rendered in commercial cases at all levels made available to the general public No through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.0 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 55 Doing Business 2020 Kenya 2. Mediation/Conciliation 0.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or No section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or No conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 56 Doing Business 2020 Kenya Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 57 Doing Business 2020 Kenya Resolving Insolvency - Kenya Indicator Kenya Sub-Saharan OECD high Best Regulatory Africa income Performance Recovery rate (cents on the dollar) 31.8 20.5 70.2 92.9 (Norway) Time (years) 4.5 2.9 1.7 0.4 (Ireland) Cost (% of estate) 22.0 22.8 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 1 .. .. .. Strength of insolvency framework index (0-16) 14.5 6.5 11.9 None in 2018/19 Figure – Resolving Insolvency in Kenya – Score 34.2 90.6 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Kenya and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 73.8: Mauritius (Rank: 28) 62.4: Kenya (Rank: 50) 57.2: Rwanda (Rank: 62) 48.2: Botswana (Rank: 84) 36.9: Namibia (Rank: 127) 31.3: Regional Average (Sub-Saharan Africa) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 58 Doing Business 2020 Kenya Figure – Resolving Insolvency in Kenya – Time and Cost Time (years) Cost (% of estate) 5 35 4.5 29.0 30 Cost (% of estate) 4 Time (years) 22.0 22.8 25 2.9 3 18.0 20 2.5 2.5 14.5 14.5 2 1.7 1.7 1.7 15 9.3 10 1 5 0 0 Botswana Kenya Mauritius Namibia OECD Rwanda Sub-Saharan high Africa income Page 59 Doing Business 2020 Kenya Figure – Resolving Insolvency in Kenya and comparator economies – Measure of Quality Kenya 5.5 3 3 3 Botswana 1 3 0 Mauritius 5.5 3 3 0.5 Namibia 2 3 1 0 Rwanda 5 3 4 3 OECD high income 5.3 2.8 2.1 1.9 Sub-Saharan Africa 4.1 2.3 1 0.5 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Kenya and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 80 70 66.3 67.4 60 50 40 33.8 31.8 30 19.3 20.5 20 10 0 Kenya Botswana Mauritius Namibia Rwanda Sub-Saharan Africa Page 60 Doing Business 2020 Kenya Details – Resolving Insolvency in Kenya Indicator Answer Score Proceeding receivership After Mirage's default on payment, as the debenture holder, BizBank would initiate receivership by filing an application requiring the High Court of Kenya to verify an identified receiver pursuant to Part VII Receivers and Managers of the Companies Act. Mirage or other unsecured creditors may appeal against the appointment before the Court, and according to Section 223 of the Companies Act, the Court can stay or restrain proceedings accordingly based on relevant parties' application, then the receivership proceeding can be converted into liquidation. However, the conversion is unlikely to happen for Mirage's case as BizBank holds 74% of the total outstanding debt and it's likely that the Court would approve its receivership request. Outcome going concern The hotel will continue operating as a going concern after the BizBank appointed receiver sell it as a going concern to a third party. Time (in years) 4.5 The receivership will approximately take 4.5 years until BizBank is repaid some or all of the money owed to it upon the completion of the proceeding. The delay is largely due to the inefficiency of court and difficulty to organize hearings. It takes about 2 years until the final judgment is made to approve BizBank's receivership appointment. This takes consideration of all possible delaying tactics adopted by Mirage or other unsecured creditors who are likely to defense BizBank's application and stop the receivership proceeding. Then it would take additional 2.5 years to find a potential buyer of the company, sell it as a going concern and receive the sale proceeds. Cost (% of estate) 22.0 The costs associated with the case would amount to approximately 22% of the value of the debtor's estate. Cost incurred during the entire insolvency process mainly include court or government agency fees (1.4%), attorney fees (up to 10%), receiver fees (up to 10%), and fees of accountants, assessors, inspectors and other professionals (2%), other costs (2%). Recovery rate 31.8 (cents on the dollar) Page 61 Doing Business 2020 Kenya Details – Resolving Insolvency in Kenya – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 14.5 Commencement of proceedings index (0-3) 3.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (a) Yes, a creditor 1.0 may file for both liquidation and reorganization What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (c) Both (a) and (b) 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value options are available, of its assets but only one of them needs to be complied with Management of debtor's assets index (0-6) 5.5 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the Yes 1.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0 Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of Yes 1.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (a) Yes over all pre- 0.5 commencement creditors, secured or unsecured Reorganization proceedings index (0-3) 3.0 Which creditors vote on the proposed reorganization plan? (b) Only creditors 1.0 whose rights are affected by the proposed plan Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as Yes 1.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote Yes 1.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 3.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? Yes 1.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 62 Doing Business 2020 Kenya Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 63 Doing Business 2020 Kenya Employing Workers - Kenya Details – Employing Workers in Kenya Answer Hiring Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 288.1 Ratio of minimum wage to value added per worker 1.2 Maximum length of probationary period (months) 12.0 Working hours Standard workday 8.6 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 21.0 Paid annual leave for a worker with 5 years of tenure (working days) 21.0 Paid annual leave for a worker with 10 years of tenure (working days) 21.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 21.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? Yes Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 2.1 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 10.7 Page 64 Doing Business 2020 Kenya Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 21.4 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 11.4 Unemployment protection after one year of employment? No Page 65 Doing Business 2020 Kenya Business Reforms in Kenya From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Dealing with Construction Permits: Kenya made dealing with construction permits more transparent by making building permit requirements publicly available online and by reducing fees. Getting Electricity: Kenya improved the reliability of electricity supply by modernizing its existing infrastructure and by inaugurating a new substation in Nairobi. Registering Property: Kenya made property registration faster by moving consents to transfer, payment and payment verification online. At the same time, property registration was made more difficult due to an additional payment slip generation and increased consent application and title search fees. Getting Credit: Kenya strengthened access to credit by introducing online registration, modification and cancellation of security interests, and public online searches of its collateral registry. Protecting Minority Investors: Kenya strengthened minority investor protections by requiring shareholders to approve the election and dismissal of an external auditor. Paying Taxes: Kenya made paying taxes easier by introducing an online filing and payment system for social security contributions. Resolving Insolvency: Kenya made resolving insolvency easier by improving the continuation of the debtor’s business during insolvency proceedings. DB2019 Registering Property: Kenya made registering property easier by introducing an online system to clear land rent rates. Meanwhile, Kenya made the property registration process less transparent by no longer making information on land ownership publicly available. Getting Credit: Kenya strengthened access to credit by introducing a new Secured Transactions Law creating a unified secured transactions legal framework, and establishing a new unified and notice-based collateral registry. Protecting Minority Investors: Kenya strengthened minority investor protections by increasing disclosure requirements, regulating the approval of transactions with interested parties and increasing available remedies if said transactions are prejudicial, increasing shareholders’ rights and role in major corporate decisions and requiring greater corporate transparency. Paying Taxes: Kenya made paying taxes easier by merging all permits into a single unified business permit and by simplifying the value added tax schedule on its iTax platform. Resolving Insolvency: Kenya made resolving insolvency easier by facilitating the continuation of the debtor’s business during insolvency proceedings, providing for equal treatment of creditors in reorganization proceedings and granting creditors greater participation in the insolvency proceedings. DB2018 Starting a Business: Kenya made starting a business easier by merging procedures required to start-up and formally operate a business. Dealing with Construction Permits: Kenya made dealing with construction permits less expensive by eliminating fees for clearances from the National Environment Management Authority (NEMA) and the National Construction Authority. Getting Electricity: Kenya improved the reliability of electricity by investing in its distribution lines and transformers and by setting up a specialized squad to restore power when outages occur. Getting Credit: Kenya improved access to credit information by starting to distribute data from two utility companies. Paying Taxes: Kenya made paying taxes easier by implementing an online platform, iTax, for filing and paying corporate income tax and the standards levy. Trading across Borders: Kenya reduced the time for import documentary compliance by utilizing its single window system, which allows for electronic submission of customs entries. Page 66 Doing Business 2020 Kenya DB2017 Starting a Business: Kenya made starting a business easier by removing stamp duty fees required for the nominal capital, memorandum and articles of association . Kenya also eliminated requirements to sign compliance declarations before a commissioner of oaths. However, Kenya also made starting a business more expensive by introducing a flat fee for company incorporation. Getting Electricity: Kenya streamlined the process of getting electricity by introducing the use of a geographic information system which eliminates the need to conduct a site visit, thereby reducing the time and interactions needed to obtain an electricity connection. Registering Property: Kenya made Registering property easier by increasing the transparency at its land registry and cadastre. Protecting Minority Investors: Kenya strengthened minority investor protections by clarifying ownership and control structures, by introducing greater requirements for disclosure of related-party transactions to the board of directors, by making it easier to sue directors in cases of prejudicial related-party transactions and by allowing the rescission of related-party transactions that are shown to harm the company. Resolving Insolvency: Kenya made resolving insolvency easier by introducing a reorganization procedure, facilitating continuation of the debtor’s business during insolvency proceedings and by introducing regulations for insolvency practitioners. DB2016 Starting a Business: Kenya made starting a business easier by reducing the time it takes to assess and pay stamp duty. Dealing with Construction Permits: Kenya made dealing with construction permits more difficult by requiring an additional approval before issuance of the building permit and by increasing the costs for both water and sewerage connections Getting Electricity: The utility in Kenya reduced delays for new connections by enforcing service delivery timelines and hiring contractors for meter installation. Registering Property: Kenya made property transfers faster by improving electronic document management at the land registry and introducing a unified form for registration. Getting Credit: Kenya improved access to credit information by passing legislation that allows the sharing of positive information and by expanding borrower coverage. DB2015 Dealing with Construction Permits: Kenya made dealing with construction permits more costly by increasing the building permit fees. Getting Credit: Kenya improved its credit information system by passing legislation that allows the sharing of both positive and negative credit information and establishes guidelines for the treatment of historical data. Paying Taxes: Kenya made paying taxes more costly for companies by increasing employers’ social security contribution rate. DB2013 Paying Taxes: Kenya made paying taxes faster for companies by enhancing electronic filing systems. DB2012 Enforcing Contracts: Kenya introduced a case management system that will help increase the efficiency and cost-effectiveness of commercial dispute resolution. DB2011 Starting a Business: Kenya eased business start-up by reducing the time it takes to get the memorandum and articles of association stamped, merging the tax and value added tax registration procedures and digitizing records at the registrar. Paying Taxes: Kenya increased the administrative burden of paying taxes by requiring quarterly filing of payroll taxes. Trading across Borders: Kenya speeded up trade by implementing an electronic cargo tracking system and linking this system to the Kenya Revenue Authority’s electronic data interchange system for customs clearance. DB2010 Dealing with Construction Permits: Kenya made dealing with construction permits more costly by raising fees. Getting Credit: Kenya improved access to credit information through a new law on credit bureaus providing a framework for a regulated and reliable system of credit information sharing. DB2009 Starting a Business: Kenya reduced the time required to start a business through improvements at the registry and better communication between relevant agencies. Trading across Borders: Kenya made trading across borders easier by extending the operating hours of customs and port authorities, reducing the number of Page 67 inspection points between Nairobi and Mombasa and introducing an electronic system allowing traders to submit their documents online. Doing Business 2020 Kenya DB2008 Starting a Business: Kenya reduced the time and cost to register a company through an ambitious licensing reform program that eliminated 110 types of business permits and simplified 8 others. Dealing with Construction Permits: Kenya made dealing with construction permits easier by simplifying procedures, improving efficiency in issuing permits and reducing the cost of obtaining a telephone connection. Registering Property: Kenya speeded up property registration by allowing private practitioners (in addition to government valuers) to carry out land valuations, which reduced the time required for a valuation from a month to a week. Getting Credit: Kenya’s private credit bureau expanded the coverage of its database by adding retailers and utility companies as providers of credit information. Page 68 Doing Business 2020 Kenya Page 69