How to start a holding company in Kenya
Introduction
Forming a holding company in Kenya can be a strategic move to streamline business operations, manage risks, and optimise tax efficiency. A holding company is a parent company that owns shares in one or more subsidiary companies but doesn’t usually engage in direct business operations itself. Instead, it oversees its subsidiaries’ management, assets, and investments.
Whether you’re expanding your business portfolio, planning an acquisition, or restructuring existing assets,@ https://afrilinkconsultants.com/ we will walk you through the key steps to forming a holding company in Kenya.
What is a Holding Company?A holding company is typically established to own and control other companies (subsidiaries), without being involved in the day-to-day operations of those businesses.A holding company can own various assets such as shares in subsidiaries, real estate, intellectual property, cash reserves, and financial investments. These assets allow it to control other businesses, manage risks, and generate income without directly engaging in operations.
Features of a Holding Company
Owns equity stakes in one or more other companies.
Can control multiple companies across different industries or sectors.
It can help with risk management by separating different business functions or assets into separate entities.
Can provide tax benefits, such as more efficient profit distribution and group relief on losses.
In short, a holding company is a powerful tool for managing and protecting assets, optimising tax strategies, and centralising control of a portfolio of businesses.
Advantages of a holding company
Setting up a holding company has countless advantages, especially for Kenyan businesses. Here are some key points.
–Asset protection
It can keep valuable possessions protected, like intellectual property, real estate, or cash by putting them in another entity. This way, if one of the operating subsidiaries has financial problems, the parent company’s assets stay secure.
–Simplified management
Running multiple subsidiaries is easier when they’re under one holding company. Each subsidiary focuses on its own goals while the company handles broad-picture management and strategy decisions.
–Tax efficiency
In Kenya, holding companies might benefit from various tax exemptions, especially for dividends from subsidiaries. This setup allows businesses to optimise cash flow and reinvest profits without heavy taxes.
–Diversification
A holding company structure enables entrepreneurs to explore different industries or markets without exposing other subsidiaries to potential risks.
–Centralized management
The holding structure facilitates unified control over multiple businesses, leading to more efficient decision-making processes, uniform branding strategies, and effective distribution of resources across the organisation.
Steps in registering a holding company in Kenya
Registration of a holding company in Kenya involves several legal and procedural steps as stipulated in the Companies Act, 2015. The process is overseen by the Business Registration Service (BRS) under the Attorney General’s Office.
Here are the steps you follow in setting up a holding company in Kenya;
Define company structure
A holding company can be a Private or a Public limited company (most holding companies are private)
Name search and reservation;https://afrilinkconsultants.com/register-a-company-in-kenya/
Make it unique and stand out! It can be a new name or an existing one, but just make sure it is not already taken by another registered company. When setting up a private company limited by shares, this step is crucial for legal incorporation at the eCitizen portal.
Prepare company documents
You will need to prepare and submit the following documents to the company registry for verification:
Form CR1: Application for company registration
CR2: Memorandum of a company with share capital (state that the company is a holding company)
Form CR8: Notice of residential address/directors’ particulars
CR12: Details of directors, shareholders, and company secretary (generated post-registration)
Pay Registration Fees
An application fee is required to complete the registration of a holding company.
Submit application via eCitizen https://www.ecitizen.go.ke/
Upload and submit all required forms and information through eCitizen and await processing, which usually takes between 3-7 working days.
Post Registration Requirements;
Open a Bank Account
Use the Certificate of Incorporation, CR12, KRA PIN, and company resolutions to open a bank account. Albeit some banks require the physical presence of a director.
Tax registration ;https://www.kra.go.ke/
After successful registration of a holding company, it is advisable to maintain compliance as follows;
Tax compliance: File annual returns, register for VAT if necessary
Maintain proper books of account;Appoint auditors (mandatory for certain thresholds)
Conclusion;
A holding company structure can open up new doors for your business operations, allowing you to venture into new markets and opportunities for growth. This can ultimately lead to increased revenue and success for your business.
Choosing our team to assist with setting up a holding company in Kenya offers several advantages. Our team of experienced accountants and tax specialists possess a deep understanding of all aspects of accounting, taxation, and legal compliance for a holding company formation in Kenya.
Our compliance with Kenya Revenue Authority regulations and policies ensures that our clients’ operating companies’ holding companies are established and operate within the bounds of the law. Call us on +254707280366 or send us an email at clientservice@afrilinkconsultants.com.
