Establishment of a Charitable Foundation in Kenya
A charitable foundation under Kenyan laws can be established either as:
(a) a company limited by guarantee; or
(b) a charitable trust.
(A) Incorporation of company limited by guarantee
A company limited by guarantee under the Kenyan Companies Act can be incorporated either with or without share capital. However, in most cases companies limited by guarantees are incorporated without share capital. A company limited by guarantee may be a private company or a public company. A private company must have a minimum of 2 and a maximum of 50 members. On the other hand, a public company must have a minimum of 7 members but there is no statutorily prescribed maximum number of persons. Private companies enjoy a number of privileges including an exemption from the requirement to file annual accounts at the Companies Registry.
Although incorporation of a company limited by shares in Kenya is relatively straight-forward process, incorporation of charitable companies is a length process due to security verifications that are conducted against the promoters of such a company before incorporation.
Procedure of incorporation
A summary of the information required for the purposes of incorporation and the costs involved are set out below;
1. An application is made to reserve the proposed name with the Registrar. The Registrar has the right to reject names he considers undesirable or which are similar to the names of existing companies. It is therefore advisable to apply for 2 or 3 alternative names. The name must include the word “Limited”. However, this requirement can be dispensed in case of charitable companies (essentially companies limited by guarantee).
2. Preparation of the Memorandum and Articles of Association of the company.
The Memorandum sets out the objects of the company in detail. In the case of companies limited by guarantee, the Companies Act require the memorandum of association to state the minimum amount which each members guarantee to contribute to the assets of the companies in the event of liquidation and this amount is left at the discretion of the promoters. It is necessary to set out all the anticipated activities of the company as part of its main objects of association.
The Articles will contain the regulations for conducting the company’s affairs. It will be necessary to consider various matters including: the size of the board of directors, the quorum for meetings of members and directors, whether the directors are subject to retirement by rotation, any special rights conferred on members to appoint directors etc.
3. The Memorandum and Articles of a private charitable company must be signed by at least 2 persons who state the minimum amount they undertake to contribute in the event of liquidation of the company.
4. The Memorandum and Articles and a Statement of the Nominal Capital are then lodged for stamping with duty.
5. After stamping, the documents are presented to the Registrar of Companies together with the following prescribed forms:
(a) Particulars of the registered office. The full physical and postal address of the registered office must be supplied. This includes the land reference number.
(b) Particulars of the directors and company secretary including their full names, usual postal address, nationality and business occupation. It is usual to have a minimum of 2 directors. There are no unusual restrictions as to who may be appointed a director. In particular, there is no requirement that a director be a resident or citizen of Kenya. Companies may also act as directors.
(c) A Declaration of Compliance by the advocate attending to the incorporation of the company.
6. For companies limited by guarantee, the documents are usually forward to the Director of National Intelligence Service in order to carry out further investigation and inquiries on the objects of the proposed company. This process may take 2 to 3 months and if the National Intelligence Service approves the incorporation of the proposed company, these documents are sent back to the Registrar of Companies for incorporation.
7. Incorporation is complete when the Registrar issues a Certificate of Incorporation which must be displayed at the registered office. At this stage, the Attorney General will usually exempt the company from using the word “limited” as part of its name.
Common seal
The company will require a common seal for executing certain types of documents (e.g. office leases). Common seals are manufactured locally at a cost of approximately KShs.2,500 and we should be pleased to make the necessary arrangements.
Licences and other registrations
Most companies will require some form of government or local authority licence before commencing business depending upon the nature of the business. We should be pleased to provide specific advice on the licences which may be required. There will also be a number of tax registrations which must be attended to including:
• the obtaining of a PIN number
• various employee related tax registrations (Pay As You Earn, National Social Security Fund, National Hospital Insurance Fund and Local Authority Service Charge)
• value added tax (where appropriate)
Effects of Registration
Upon incorporation, the Foundation becomes a body corporate capable in its name of:
a) suing and being sued;
b) taking, purchasing or otherwise acquiring, holding, charging or disposing of movable and immovable property;
c) entering into contracts; and
d) doing or performing all such things or acts necessary for the proper performance of its functions.

Under the laws of Kenya, it is possible for a foundation to be incorporated under the Trustees (Perpetual Succession) Act (Chapter 164 of the Laws of Kenya). This Act in section 3(1) thereof provides that, “Trustees who have been appointed by anybody or association of persons established for any religious, educational, literary, scientific, social, athletic or charitable purpose, or who have constituted themselves for any such purpose, may apply to the Minister …..for a certificate of incorporation of the trustees as a corporate body.”
One the trustees of a charitable entity have been incorporated under the Act, they become a body corporate with a perpetual succession and all other legal indicia appertaining to a body corporate. Section 3(3) of the Trustees (Perpetual Succession) Act states that, once incorporated “the trustees shall thereupon become a body corporate by the name described in the certificate, and shall have perpetual succession and a common seal, and power to sue and be sued in their corporate name and, subject to the conditions and directions contained in the certificate, to hold and acquire, and by instruments under the common seal to convey, transfer, assign, charge and demise any movable or immovable property or any interest therein now or hereafter belonging to, or held for the benefit of, the trust concerned in the same manner and subject to such restrictions and provisions as trustees might so do without incorporation”.
For the trustees to get incorporated, they should prepare a Trust Deed. The Trust Deed inter alia defines:
• the objects of the Trust;
• the Name of the Trust;
• the powers of the trustees;
• the powers to change and appoint additional trustees;
• resignation and removal of trustees; and
• meeting of trustees.
Execution and stamping of the Trust Deed
Once the trust deed has been approved by the trustees, the deed should be signed as appropriate and thereafter stamped with nominal duty of KShs.200.
Stages of Incorporation
The incorporation of a charitable trust involves two stages:
(a) Registration under the Registry of Documents Act
After stamping being stamped with duty, the trust deed should be presented for registration at the Registry of Documents at Ardhi House. The Registry of Documents is established under the Registry of Documents Act (Chapter 285 of the laws of Kenya). The registration under this Act takes about 1 or 2 weeks.
It should be noted that registration under the Registration of Documents Act does not make a trust into a body corporate. However, once the trust is registered under this Act, the trustees can commence implementing the objects of the trust as a simple trust.

(b) Incorporation under the Trustees (Perpetual Succession) Act
After registration under the Registry of Documents, a certified copy of the trust deed and a petition for incorporation prepared in the prescribed form should be lodged with the Minister for Lands for incorporation of the trust. The petition must state, among other things, that the trustees are desirous of being incorporated under the Act and give a pictorial representation of the common seal of the trust, which must be rounded in shape and with the name of the trust inscribed thereto. The Minister for Lands normally takes about 2 to 3 months after presentation of the petition to issue the Trustees with a Certificate of Incorporation.

Please note that the first trustees of an incorporated trust are nominated in the trust deed, and their names will be noted in the certificate of incorporation of the trust. Thereafter, these trustees may retire and new ones appointed as per the provisions of the trust deed. Moreover, additional trustees may be appointed as per the provision of the trust deed. Every change of trustees must be reported to the Registrar of Documents in the prescribed form and noted in the original certificate of incorporation of the Trust.
Nationality of Trustees
The trustees of an incorporate trust may be individuals, both local and foreigners, or a body corporate in the nature of a trust corporation, or a mixture of both. However, the Trustee Act provides that a foreign trustee who remains out of Kenya for a period exceeding 12 months may be removed from office by the remaining trustees.
The trustees are duty bound to comply with the provisions of the trust deed establishing the trust as well as the applicable legal provisions. Trustees must also act in the best interest of the trust and avoid conflict of interest situations. The trustees are however permitted to delegate some of their functions to a committee of trustees or employees of the trust.
When incorporated the trustees are require to exercise their powers and make decisions through resolutions of the board of trustees at duly constituted meetings of trustees. Meetings may also be held through an electronic medium which allows participants to communicate with each other e.g. teleconference or video conference, if this is provided for in the trust deed. Most trust deeds also provide that a resolution assented to in writing by all the trustees shall be deemed to have been duly made notwithstanding the absence of a meeting to resolve the matter.
Normally, the trust deed will also contain a provision empowering the trustees to enact regulations to govern the conduct of their meetings including order of business, voting rights, procedure of recording minutes.
(a) The trust becomes a body corporate with:-
• perpetual succession and common seal, whose existence is not affected by the death or other incapacities of its trustees;
• legal capacity to own property in its own name;
• ability sue and be sued in its own name; and
• ability to hire employees in its own name.
(b) The trust is eligible to apply for and obtain:-
• tax exemption from the Kenya Revenue Authority pursuant to paragraph 10 of the First Schedule to the Income Tax Act;
• exemption of land rates payable on its immovable properties; and
• exemption on stamp duty when buying land and property pursuant to section 52(2) (b) of the Stamp Duty Act.
An incorporate trust may by means of a resolution change its name by mean of a special resolution which must be registered at the Lands Office and noted in its original certificate of incorporation. An incorporated trust also may by means of a special resolution resolve to dissolve, in which case its assets could be transferred to another charitable entity with similar objects.