Alert: Public Benefits Organizations (PBO) Act

The Public Benefits Organizations Act, 2013, has officially come into effect as of May 9, 2024, following Gazette Notice No. 78. This new legislation replaces the Non-Governmental Organizations Coordination Act, 1990, and introduces significant changes to the registration process for organizations previously classified as non-governmental organizations in Kenya.
26.08.2024
Category : Business echos Country : Kenya

The Public Benefits Organizations Act, 2013, has officially come into effect as of May 9, 2024, following Gazette Notice No. 78. This new legislation replaces the Non-Governmental Organizations Coordination Act, 1990, and introduces significant changes to the registration process for organizations previously classified as non-governmental organizations in Kenya.

The objective of the Act is to provide for registration of public benefit organizations (PBOs) as well as establish an administrative and regulatory framework within which PBOs can conduct their affairs. The key features of the PBOA are as outlined below:

Registration

A PBO is required to be registered under the PBOA for it to enjoy benefits that accrue under the PBOA, as well as obtain the right to refer to itself as a public benefits organization.

Registration under the PBOA is exclusive and comprehensive, and no organization will be allowed to hold a registration under the PBOA, as well as under a different Act – where an organizations has multiple registrations, PBO registration shall take precedence and the other registrations shall be deemed invalid.

Previously, an organization could be registered as an NGO while maintaining corporate registration under a different statute.

A simplified registration process is outlined for International NGOs wishing to operate in Kenya in which a certificate to operate is issued. However, international NGO must obtain substantive registration if it intends to raise funds from within Kenya.

Benefits of registration

A PBO will enjoy the following privileges:

  1. Income tax exemption on income received from membership subscriptions, donations and grants.
  2. Income tax exemption on income from investment and operational activities.
  3. Tax exemption on income from interest and dividends from investments and capital gains from sale of assets.
  4. Stamp duty and court fees.
  5. Preferential VAT and customs duty treatment for imports, and employment taxes.
  6. Government financing opportunities by way of grants, contracts and subsidies.
  7. Preferential treatment on public procurement processes.
  8. Preferential access to state information and state training courses offered by state institutions.

International NGO

An international NGO wishing to operate in Kenya is required to register substantively if it wishes to raise funds or implement its projects in Kenya and should also ensure that:

  1. At least a third of its directors are Kenyan citizens and are resident in Kenya.
  2. It maintain a physical office in Kenya.

Institutions

PBOA creates the following new institutions:

  1. Public Benefits Organizations Tribunal, which is tasked with resolving disputes occurring between the regulators and the PBOs.
  2. The Public Benefits Organizations Authority which is the regulator under the PBOA.
  3. The National Federation of the Public Benefits Organization, which is tasked with providing leadership and self-regulation to PBOs.

Exclusions

The following institutions are excluded from registration as PBOs:

  1. Trade union within the meaning of the Labour Relations Act, 2007 (Cap. 233);
  2. Public body established by or under any written law;
  3. Political party within the meaning of the Political Parties Act, 2007 (Cap. 7B);
  4. Religious organization which is primarily devoted to religious teaching or worship;
  5. Society within the meaning of the Societies Act (Cap. 108);
  6. Co-operative society within the meaning of the Co-operative Societies Act (Cap. 469);
  7. Sacco society within the meaning of the Sacco Societies Act (Cap. 490B);
  8. Micro-finance institution within the meaning of the Micro-Finance Institutions Act, 2006 (No. 19 of 2006);
  9. Community based organization whose objective include the direct benefit of its members

Obligations

The PBOA creates the following obligations:

  1. Preparation of annual financial statements and submission of the same to the PBOA
  2. The duty to file returns with the regulator 6 months of the end of the accounting period. This return is required to provide information on the programs of the PBO.
  3. The duty to disclose to the regulator the details of its officials within a month of appointment or election of its governing body.
  4. Obligation to seek registration under the PBO Act within a year of commencement of the Act.

Activities covered

The activities that a PBO may be registered to pursue include:

  1. Legal Aid.
  2. Agriculture.
  3. Children.
  4. Culture.
  5. Disability.
  6. Environment and conservation.
  7. Governance.
  8. Gender.
  9. Health.
  10. Housing and settlement.
  11. Human Rights.
  12. Refugees.
  13. Sports.
  14. Animal welfare.

Conclusion

The Public Benefits Organizations Act (PBOA) 2013 became operational on 14 May 2024 following a lengthy process that culminated in the issuance of a legal notice that stipulated the commencement date of the Act.

This development enhances the regulatory framework for charitable organizations. As organizations begin to navigate the new registration procedures, we will monitor any potential challenges they may face.