Wednesday, 25 April 2012

LEGALITY OF SELLING AN ALREADY INCORPORATED COMPANY AT LESS THAN KSHS. 50,000.00 IN KENYA


The law governing fees chargeable by advocates for various legal services is found in the Advocates (Remuneration) Order (ARO) as read with the Advocates Act, Chapter 16 of the Laws of Kenya. The ARO stipulates that lawyers should charge a minimum of Ksh. 50,000 for registration of companies as PROFESSIONAL FEES. 

Section 36 (1) of the Advocates Act on the other hand provides that “Any advocate who holds himself out or allows himself to be held out, directly or indirectly and whether or not by name, as being prepared to do professional business at less than the remuneration prescribed, by order, under this Act shall be guilty of an offence.” Section 36 (2) thereof provides that “No advocate shall charge or accept, otherwise than in part payment, any fee or other consideration in respect of professional business which is less than the remuneration prescribed, by order, under this Act.”

On the face of it, it would therefore appear that selling an already registered company at less than Kshs. 50,000 would be an illegality by virtue of section 36 of the Advocates Act. However, the ARO does not prescribe the PRICE at which a lawyer and or anyone else for that matter may SELL his existing companies to someone else. As such, once a company is registered, its shareholders may as well sell the company at Kshs. 1 as consideration.

Unfortunately or otherwise, this lacuna in the law has been used by practitioners keen on defeating the import of Section 36 of the Advocates Act in so far as legal fees for incorporation of companies is concerned.

Be that as it may, that which the law does not prohibit expressly or otherwise remains lawful. Accordingly, it's perfectly lawful to incorporate a company (shelf) and thereafter sell the same at whichever price the buyer is willing to part with.

We welcome any enquiries regarding registration of companies, business names and any other corporate entity. Our email address is stralexgroup@gmail.com or you may call us on +254 773 865 798. We will endevour to revert to your queries within 24 hours.

For: Strategic Legal Solutions Group Limited

Corporate Law & Business Services Consulting Group * a participating consultancy in the SLS Group of Consultancies.

44 comments:

  1. You are welcome Daniel. Let's share, enjoy and learn

    ReplyDelete
  2. I tend to disagree with this post. The ARO regulates the charges for the incorporation of a company. When you talk of "selling" an already existing company (shelf co.), then it is a totally different scenario and the ARO does not apply. In such a case, it is the shareholders of the shelf company who sell their shares and the consideration is based on the value of the company - valuation of the company may be necessary or it can be a nominal amount (Kshs. 1). The lawyer's role in this will only be in the legal formalities like the preparation and filing of the share transfers and the other relevant returns. The charges will be for this services, but not for "selling" the shelf company.

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  3. Thanks FK for your good comment. I agree in toto that the ARO does not apply in so far as sale of an already registered company is concerned. A careful reading of the post will show that the author does not purport to say the ARO applies to such 'sale'. The post also points out that the sale could be by the shareholders or the advocates who incoproorated the company (if the advocates are in fact a shareholders). That said, of course the technicalities of the sale of such a shelf company would be managed by an advocate, a restructuring process whose legal fee is subject to agreement between the advocate acting and the purchaser of such a shelf company. The argument above is simple, the law prohibits registration of a company at a legal fee of less than Kshs. 50,000. But it doesnt restrict a party/shareholder (whether on not an advocate) from selling a shelf company at whichever price he deems fit. Dont you agree FK?

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