Incorporation of Business Entities by Foreign Companies in Kenya



Yes, foreign companies can incorporate/register a business entity. The incorporation/registration of a foreign entity in Kenya is governed by the Companies Act, 2015 as well as sector specific laws. Sector specific laws are laws governing the industry/ market where the foreign entity wishes to operate in. For instance, anyone wishing to operate a banking business must, before registration/incorporation seek a license from the Central Bank, the industry’s regulator.

A foreign entity duly registered in another country can register and operate the following business models in Kenya:

  • A subsidiary of the foreign entity;
  • A branch office of the foreign entity

Incorporation of a Subsidiary

A subsidiary is like a local incorporated company with the only difference being that it is wholly or largely owned by another incorporated entity. This can be incorporated either as a private limited liability company or a public limited liability company depending on the number of members.

The number of members for a private limited liability company can range from one (1) member up-to fifty (50) members excluding employees. This means that the subsidiary can be wholly owned by the parent company. On the other hand, there is a requirement that it must have at least one director who is a natural person.

Incorporation Process

The incorporation process of companies is currently undertaken on the e-citizen online platform that sought to eliminate the physical human interface though the process still relies on officials on the back end who review and approve applications. The process is currently a one-stop process where you apply for reservation of name as you make the full application for incorporation.

One is at liberty to adopt the model articles of association or customize the same to suit their requirements, particularly where one wishes to align the articles with those of a parent company.

Advantages of incorporating a subsidiary

  • The subsidiary may or may not carry out the same business as its parent company;
  • It has a separate legal personality from the parent company. This means that the liabilities of the subsidiary do not accrue to the parent company;
  • Tax benefits. A subsidiary is taxed at the rate of 30% of the income generated in Kenya which is the same as a local company. This is cheaper compared to the corporate income tax rate of a branch which is at 37.5%. The tax is only chargeable on the income accrued and derived in Kenya.
  •  The subsidiary can choose to retain the name of the parent company or get another one altogether.

Disadvantages of incorporating a subsidiary

  • Should you not have Kenyan shareholders and/or directors then you will be required to take out an investor permit to be able to get tax registration, open bank accounts and generally run your business in Kenya;
  • The winding up process of a subsidiary is complex as it is treated as a company incorporated in Kenya and hence has to follow the procedure in accordance with the Insolvency Act 2015.


The process currently takes anywhere between 3-7 working days if there are no sector specific approvals required once we are provided with all requirements. A request to amend, provide alternative names etc. may delay the process.

A branch of a Foreign Company

A branch is essentially a company organized to conduct business on behalf of a parent company in another jurisdiction. The branch office is like a new placement, department or division that is set up under the parent company’s name and forms part of that legal entity.

Registration Process

The registration process of a foreign company is provided for under Part 37 of the companies Act, 2015. Section 974 of the Companies Act, provides that a foreign company shall not carry on business in Kenya unless it is registered or has applied to be registered and the application has not been dealt with within the prescribed period.

Thus the first step is to apply to for registration of foreign company to the Registrar of Companies through the e-citizen portal. The application is usual done under Form FC1.

Branches must have a local representative resident in Kenya, who may be a citizen or a non-citizen. This is also the person responsible for the company’s compliances in Kenya. We offer local representative services at an annual fee.

Advantages of setting up a branch of a Foreign Company

  • The registration system for branches is simple and thus foreign companies seeking to set up a place of business in Kenya do not face complex procedures of registration;
  • There is more control by the parent company since the activities of the branch are fully managed by the parent company especially decision making;
  • Opening a branch allows the parent company access to a new market and target new consumers of their goods and service without the need for creation of a new entity.

Disadvantages of setting up a branch of a Foreign Company

  • The parent company is liable for the actions /liabilities of the branch office;
  • Losses incurred by the branch office are included in the parent company’s income statement;
  • All actions by the branch office need ratification by the board of directors of the parent company which in turn may limit the performance of the branch office;
  • A branch has limited business scope as it must be within the scope of that of the parent company. It cannot go beyond the scope provided for by the parent company’s incorporation and constituting instruments.
  • The current rate of corporate income tax for a branch is 37.5%.

Registration will take approximately 3-7 working days.

Sector Specific Regulations

Different sectors are regulated by different statutes and bodies. These regulations may place a cap on the shareholding of such businesses. For example, telco companies are required to have at least 30% shareholding to be Kenyan either at the inception or within three years after being licensed. These sector specific regulations are important when it comes to issuance of licenses and future compliances.



  1. Definition
    a. Discrimination at the work place may be defined as the exclusion of and differential treatment accorded to a particular group of persons based on a range of social categories such as sex, religion, disability, opinion or race.
    b. Prejudicial treatment has the effect of denying particular classes of people access to equal opportunity or their right to fair treatment and labor practices despite the fact that they may be skilled and proficient in the work that they are involved in.
    c. Most people are of the notion that discrimination only occurs during the subsistence of one’s employment, however, this could not be further from the truth. Discrimination may occur at the recruitment process, during one’s employment or during the termination of their engagement.
    In this article, we will be looking at discrimination at the work place and what to do as an employer or employee dealing with such a situation.
  2. The Law Surrounding Discrimination At The Workplace
    a. Article 27 of the Constitution of Kenya (2010) provides for equality and the freedom from discrimination. As far as discrimination at the workplace is concerned, the following provisions apply:
    i. Article 27 (3): Women and men have the right to equal treatment, including the right to equal opportunities in political, economic, cultural and social spheres;
    ii. Article 27 (4): The State shall not discriminate directly or indirectly against any person on any ground, including race, sex, pregnancy, marital status, health status, ethnic or social origin, colour, age, disability, religion, conscience, belief, culture, dress, language or birth;
    iii. Article 27 (5): A person shall not discriminate directly or indirectly against another person on any of the grounds specified or contemplated.
    b. Section 5 of the Employment Act also echoes the sentiments of the Constitution of Kenya (2010). Specifically, section 5(2) of the Employment Act mandates employers to promote equal opportunity and eliminate discrimination as part of their practice during the course of their business.
    c. Section 5(5) of the same directs employers to compensate their employees equally for value of equal work performed.
    d. Section 5 of the Labour Relations Act and section 12 & 15 of the Persons with Disabilities Act 2003 reiterate the positions taken by the aforementioned provisions.
    e. Nonetheless, there are exceptions to the above-mentioned provisions. Section 5(4) of the Employment Act provides instances where an employer’s actions will not be regarded as discrimination. These are:
    i. When affirmative action measures consistent with the promotion of equality are undertaken;
    ii. When employers engage in exclusion based on an employee’s job competencies;
    iii. When employers engage citizens in accordance with National employment policy;
    iv. When employers restrict access to limited categories of employment in the interest of state security.
    f. As a final note, the provisions of Article 27 of the Constitution of Kenya (2010) as well as those of Section 5 of the Employment Act are not exhaustive enough to cover all the grounds upon which discrimination may occur. This is so as discrimination is broad ranged and has the ability to shift overtime. Therefore, it is important to all that courts develop jurisprudence that interprets the application of the above-mentioned provisions.
  3. Analysis Of The Law Surrounding Discrimination At The Workplace
    a. The courts have a wide range of jurisprudence that seeks to interpret the law surrounding discrimination at the workplace. Notably, the case of V.M.K v Catholic University of Eastern Africa (C.U.E.A) [2013] eKLR is a landmark case detailing how the courts handled allegations of discrimination on the basis of sex, HIV status and pregnancy.
    b. The facts of the case were that the claimant had been employed by the respondent on a casual basis. At the time she was earning Seven Thousand Kenya Shillings with no provision of benefits. Her colleagues were two male employees engaged in the same capacity as the claimant, however, the terms of their contract were permanent and pensionable. In the year 2003, the claimant was shortlisted, interviewed and recommended for an internal job placement.
    c. As part of the requirements for the job placement, a medical test had to be conducted on the applicants. However, there was no mention that the same would include a HIV test. When the results of the same were out, the claimant was informed that she was HIV positive. This information was shared amongst her colleagues in the workplace despite the fact that she had not consented to the same. It was on this basis that the claimant was denied the earlier stated job placement and was, forthwith, employed vide contracts with shorter terms. She was also denied paid maternity leave and her employment was subsequently terminated once she resumed work after her leave.
    d. In the courts determination, it was held that the respondents had not submitted compelling advice to prove that their actions were justified and non-discriminatory. If anything, their lack of proper documentation and rationale behind the compensation structures applied to the complainant proved that the respondents were engaging in direct discrimination.
    e. Similarly, in the case of Gichuru v Package Insurance Brokers Ltd (Petition 36 of 2019) [2021] KESC 12 (KLR) the respondents failed to establish that the termination of the appellant’s engagement was due to the fact that he could no longer physically move around albeit his ability to perform his job. The courts held that section 15 of the Persons with Disabilities Act mandated them to provide special facilities in order to accommodate persons with disabilities; a provision they had not complied with.
    f. Nonetheless, as was earlier stated, employers are allowed to distinguish among employees on various positive fronts requiring them to do so. In the case of I.P.O.A v National Police Service Commission and 660 others [2014] eKLR ,it was held that pregnant women could not participate in police recruitment processes because the activities involved were rigorous and would cause harm to the unborn child. This form of discrimination was held to be positive as it was based on the claimant’s ability to perform the job.
  4. Various Forms Of Discrimination That Can Occur In The Workplace
    a. Pursuant to the provisions of Article 27(4) of the Constitution of Kenya 2010 and Section 5 (3) of the Employment Act, discrimination may occur on the grounds of race, sex, color, ethnicity, pregnancy, disability, HIV status, mental status, opinion, nationality, social origin, religion, marital status, age, culture, dress and gender. However, this list is not conclusive.
    b. In an attempt to capture the various forms of discrimination that may occur in the work place, there are three main categories under which allegations of discrimination may be grouped:
    i. Direct Discrimination: this refers to out rightly comparable instances which clearly show that the treatment being afforded to one employee is different to the treatment being afforded to another despite the likeness and similarity in the job positions occupied;
    ii. Indirect Discrimination: this form of discrimination occurs when protected classes of people are affected by the application of policies or practices in the work place that limit their freedom to engage as they would or; excludes them from accessing certain opportunities. For example, a job advertisement stating as a requirement that applicants are not allowed to wear headscarves is a form of indirect discrimination as Muslim women would be affected;
    iii. Positive discrimination: this form of discrimination is applied in order to positively benefit groups that have been affected by discriminatory practices in the work place. An example of the same would include affirmative action requiring male members of an organisation to be composed of only two-thirds of the populace.
  5. The Burden Of Proof In Proving Discrimination Claims
    a. In the case of Gladys Mutanu Vundi v Bank of Africa Limited, ELRC Cause No. 1277 of 2011 the courts held that in order to prove an instance amounting to discrimination, a claimant had to set up a clear cut case by:
    i. Establishing membership in a protected class of persons who may be discriminated upon on the basis of their membership to the same.
    ii. Establishing that they met the qualifications and the requirements of the job that was lost.
    iii. Proving that the adverse treatment received and/ or subsequent decision made was as a result of the employee being a member of the protected class.
    b. By establishing a prima facie case based on these precincts, section 5(7) of the Employment Act directs that the employer will be responsible for discharging the burden of proof by proving that his or her actions amounted to positive discrimination.
  6. Remedies Available To The Discriminated Employee
    a. Upon the successful institution of a case, the victim of discrimination may be awarded quantum damages, taking into account the nature of discrimination, with the intention of repositioning the victim as though the discrimination never occurred. This however should not be taken to mean that the victim will be reinstated as an employee, though the same is possible as a remedy through a court order.
    b. Other reliefs available to a claimant in such an instance include:
    i. A declaration of rights;
    ii. Issuance of conservatory orders;
    iii. Issuance of an injunction;
    iv. Issuance of prohibitory orders putting a stop to the employer’s actions.
  7. Preventative Measures That Employers Can Apply
    a. It goes without saying that it is crucial to the performance of a business that its brand and reputation are held to the highest possible standard. Significant losses may accrue if and when discriminatory law suits are publicly filed against organisations. To counter the same, it is important that employers create and maintain a work culture that encourages diversity. The same can be achieved through the following actions:
    i. Through the help of their advocates, employers may draft comprehensive employee handbooks that capture strict policies and internal process mechanisms that may be sought when reporting claims of discrimination. These policies should also effectively cover grounds of discrimination prohibited within the workplace and the consequences of engaging in the same once disciplinary processes have been initiated.
    ii. Employers may need to undertake regular training of their staff on what constitutes discrimination, how it not only goes against the law, but the company’s policies as well.
    iii. Organisations may endeavor to conduct regular audits on how benefits within the company are distributed so as to gauge whether the company grants these benefits out of merit or if there are discriminatory factors that come into play that may be improved on.
    iv. Business organisations may also endeavor to improve working conditions that mainly affect marginalized groups within the office. Rather than excluding specific groups from participating in certain job types the employer should seek to improve conditions that may adversely affect marginalized groups in order to increase equitable access to valuable opportunities.
    v. Having scheduled performance reviews whenever an employer has any concerns with an employee may also insulate the employer from discriminatory claims. It is possible for employees to sue for discrimination at the face of termination that was fairly accorded. Therefore, it is imperative that employers keep track of their concerns once they arise as proper and honest record keeping may in turn prove that any action taken against an employee was fairly accorded.
    vi. Organisations must ensure that they have anti-retaliation policies in place in order to prevent any instances where an employee may make an allegation for discrimination and a member of the organisation acts against the claimant in retaliation to the claim raised.
    vii. Lastly, it is imperative that employers take discrimination claims seriously by thoroughly investigating any claim before discounting the same. An employee handbook setting out internal processes that may be triggered after a complaint has been raised may be helpful and wise to follow in this instance.
    Employment related matters are part of a wide berth of services Munyao-Kayugira & Co., offers to its clients. For any inquiries or support you may need, you can reach us through our email

Article By Lawyer Ms. Ashlyne Alwanga Kioge