There are needs in every society that governments are unable to meet. This gap is bridged by civil society, of which organisations such as public benefit organisations (PBOs) form part. Public benefit activities enhance economic, environmental, social or cultural development by advocating issues of public interest.

The PBO Act aims to support PBOs to meet the diverse needs of Kenyan people, protect internationally recognised freedoms, such as freedom of expression and association, promote compliance by PBOs, promote collaboration between PBOs and the Government, provide transparent registration procedures, strengthen civil society, and improve the conditions and quality of life for the people of Kenya.

Under the PBO Act the Government is obliged to provide an enabling environment for PBOs to be established and operate in. The guiding principles of collaboration between the Government and PBOs include dialogue and communication, managing diverse expectations, conflict management, learning and sharing, joint initiatives, institutionalisation, good governance, and promotion of trust and predictability, among other things.

Public Benefit Organizations Regulatory Authority

The PBO Act establishes the Public Benefit Organizations Regulatory Authority (Authority), which will be run by a board (and which replaces the infamous NGO Board) composed of the chairperson; three members who have rendered distinguished service in civil society; the principal secretaries in the respective ministries responsible for PBOs (finance and foreign affairs); the Attorney-General; the chairperson and two members of the governing board of the National Federation of Public Benefit Organizations (Federation); and one public officer representing the principal secretary responsible for such departments as determined by the Authority.

The Authority has powers to independently (i) register and deregister PBOs, (ii) maintain a register of PBOs, (iii) interpret national policy on PBOs, (iv) receive and review annual reports of PBOs, (v) advise the Government on PBOs’ role in development, and (vi) advise and train PBOs.

Registration of PBOs

Every NGO registered under the repealed NGO Act will be deemed to be registered as a PBO under the PBO Act and is required within one year from the commencement date to be registered as a public benefit organisation under the PBO Act. NGOs that fail to comply with this requirement will cease to have PBO or similar status 30 days after the expiration of the notice period. For new NGOs, they have to register under the PBO Act.

Unlike its predecessor, the PBO Act clearly outlines the specific documents and information required for registration of a local an international PBO. Further, the PBO Act elaborates in great detail on what key information should be detailed in a PBO’s constitution. This is a welcome change as it creates predictability and enables founders and advisors of PBOs to anticipate and pre-empt the expectations of the Authority on registration requirements.

Entities carrying out public benefit activities but registered under other laws will now need to apply to be registered under the PBO Act or be conferred PBO status by the Authority for them to enjoy the benefits provided under the PBO Act. 

International non-governmental organisations are required to apply and obtain a certificate from the Authority to operate in Kenya as PBOs by filing the following documentation with the Authority:

• an application form;
• proof that it is a legal entity in another country;
• the organisation’s address in Kenya; and
• a written statement from a representative of the organisation at its headquarters with the authority to provide such statement stating: (i) the purposes of the international NGO, (ii) a description of the activities to be carried out by the organisation in Kenya, and (iii) the name and address of and contact information of the authorised agent.

Similar to the provisions in the repealed NGO Act, international organisations will need to have resident Kenyans forming at least one-third of the board and also maintain an office in Kenya.

An application to register a PBO will be considered by the Authority within 60 days and, if it is satisfied that the applicant meets the requirements, it will register the organisation. If the application is not compliant, the Authority will notify the applicant in writing, giving reasons and remediation requirements and the period (not exceeding 30 days) within which to comply with the requirements. The period within which to comply may be extended for a maximum period of 21 days upon showing good cause. Upon complying with the request, the authority will, within 14 days of receipt of the requested documents/information, register the PBO. Where the applicant does not comply with the Authority’s request, the Authority will refuse to register the PBO and notify the applicant in writing of the refusal and the reasons therefor.

Upon registration, a PBO will be issued with a certificate of registration which will be the conclusive evidence of the organisation operating in Kenya. A PBO retains registration until the registration is cancelled, the organisation is voluntarily deregistered, or the PBO is wound up or dissolved.

Although the repealed NGO Act allowed for certain entities to be exempted from registration, such exempted entities must now apply for registration under the PBO Act within three months of the PBO Act commencing.

Benefits of registration

Registered PBOs will benefit from indirect government support (through tax exemptions), direct government financing (through partnerships), preferential treatment in public procurement procedures, accessibility to information, and access to training courses offered by government institutions. Some of the tax benefits include:

• exemptions from income tax on income received from membership subscriptions, donations, grants and any other income wholly used to support the entity’s public benefit purpose;
• exemptions from tax on interest and dividends on investments and gains from the sale of assets;
• stamp duty and court fees exemptions;
• preferential treatment for value-added tax (VAT) and customs duties relating to imported goods or services used to further their public benefit purpose;
• incentives for donations; and
• employment tax preferences.

Some of these incentives, e.g. incentives for donations, are already captured under current legislation. Amendments may be necessary to operationalise the remaining incentives, such as employment tax preferences and preferential treatment for VAT and customs duties.

Self-regulation

The Federation is established under the PBO Act as the umbrella organisation for all PBOs. The objectives of the Federation are to provide leadership on matters of interest in the sector, promote self-regulation, co-ordinate self-regulation forums, monitor the performance of self-regulation forums, advise the Authority on the development of PBOs, advise donors and the Authority on matters concerning the sector, as well as capacity building for PBOs.

Public Benefit Organizations Regulatory Disputes Tribunal

In contrast to the NGO Act, which did not have an internal dispute resolution mechanism, the PBO Act establishes the Public Benefit Organizations Regulatory Disputes Tribunal (Tribunal), which has jurisdiction to hear and determine complaints arising out of breach of the PBO Act. The Tribunal has powers to hear and determine:

• appeals from the Cabinet Secretary or the Authority concerning the Federation and decisions of the Federation;
• disputes between members of the Federation;
• disputes between the Federation and the Authority; and
• disputes between any member of the Federation and the Federation.

Compliance requirements

PBOs are obligated to prepare and keep proper records as well as have financial statements prepared annually by an independent auditor and to the standard acceptable to non-profit organisations.

Further, within six months after the close of each financial year, each PBO is required to file with the Authority a statement of its audited accounts, a certified copy of financial statements, and a report detailing the activities of the PBO during the year.

PBOs are also required to provide the Authority with details (such as names and physical, business, and residential addresses) of governing body members within one month after any election or appointment.

Any amendments to a PBO’s constitution, and basic information such as addresses, details of the founders, etc. must be notified to the Authority, within 60 days of occurrence.

Deregistration and dissolution

A PBO may be deregistered or wound up voluntarily. Where the entity is a membership organisation, a resolution by at least two-thirds of the members is signed by the chairperson. If the entity is a non-membership organisation, a voluntary decision is made by its governing body per the organisation’s constitution. A PBO that desires to voluntarily dissolve will have the right to determine organisations to which it will distribute its assets on condition that such organisation(s) are certified by the Authority to be in good standing.

Involvement by the Government

The PBO Act makes it mandatory for the Government to involve PBOs in policy decision-making on issues affecting them, especially on local levels. Every ministry is required to designate officers to handle matters relating to PBOs and have close working relations with each other and the Authority.

Entry permits

PBOs that wish to employ non-citizens must demonstrate to the immigration department that the services of such employees are necessary for the proper functioning of the organisation; no persons with comparable skills are available locally; and the employees will train Kenyans to obtain scientific, technical and managerial skills. The repealed NGO Act required the NGO Board to receive applications for entry permits and thereafter make recommendations to the immigration department for issuance of the permit, whereas the PBO Act allows for direct entry permit applications to the principal immigration officer. This change may shorten the period for obtaining permits for PBO staff.

Offences and penalties

Under the PBO Act, it is an offence punishable on conviction by a fine not exceeding KES 300,000 or imprisonment not exceeding two years, or both, to fraudulently hold an organisation to be registered under the PBO Act or to forge documents to procure registration. Considering the crucial role of the PBOs in society, we are of the view that these penalties need to be stiffer in order to safeguard the public from unscrupulous individuals and deter such individuals from utilising the sector for unauthorised activities.

Regulations

The PBO Act is in force, however the regulations to the PBO Act are yet to be published. The regulations are to be made by the Cabinet Secretary on the recommendation of the Authority to guide the implementation of the PBO Act. The enactment of the regulations must be subject to public participation as enshrined in the Constitution.

Conclusion

With the robust regulatory framework governing non-profit entities in Kenya, PBOs now have certainty about the registration process, compliance issues and generally how to carry out their activities. The specific requirement for the Government to support civil society is plausible. The PBO Act will increase accountability for both the Authority and PBOs, improve governance of PBOs and provide an enabling environment for civil society to thrive.