Decriminalisation of Companies Act, 2015 Offences in Kenya: a Problem of Enforceability and Compliance

Abstract

This research project addresses the use of criminal sanctions in enforcing minor infractions in the Companies Act, 2015. It analyses the origin of criminal sanctions in company law in general by looking at the introduction of those sanctions from statutes adopted by Kenya from the United Kingdom over the years. The study also maps out several minor offences in the Companies Act, 2015. The mapping helps to demonstrate the proportionality of the sanctions used against the severity of the breach. The study demonstrates that some of the breaches, especially those in relation to late filing of notifications would be minor and would not warrant the use of criminal sanctions to enforce. The question of enforcement is also addressed in the study by looking at the practicality, cost and effectiveness of using criminal sanctions in the Companies Act, 2015. The study indicates that it is not practical to prosecute all companies that breach the provisions of the Companies Act. The bulk of cases that would find their way to court would clog the already strained judicial system. Further to this, the cost of using criminal sanctions is too high compared to the benefits that would be derived from successful convictions. Overall, the study finds that it would not be effective nor efficient to use criminal sanctions to enforce minor infractions in the Companies Act, 2015. Several countries provide valuable lessons that could be used by Kenya to advance the decriminalisation debate. Among such countries are Estonia, Ghana, the United Kingdom and Australia. In as much as no single country has adopted civil penalties or administrative fines for all minor offences in their respective statutes, it is easy to utilise the few provisions adopted by them to argue for the decriminalisation of minor offences in general in the Companies Act, 2015. From the lessons learnt from other countries and previous studies done in the area of decriminalisation, it is evident that the use of a variety of enforcement mechanisms could be adopted to enhance the efficiency and effectiveness of sanctions in general. Further, the insistence on the use of criminal sanctions as an effective deterrence tool has been demystified since there could be other more effective measures depending on the level of severity of the viii offence, the proportionality of the sanction to the offence and the cost associated with enforcement of the sanction.