Implications of the Draft Companies (Annotation and Rectification) Regulations, 2025 for companies

Sammy Ndolo, Managing Partner at Cliffe Dekker Hofmeyr (CDH) Kenya, examines how the Draft Companies (Annotation and Rectification) Regulations, 2025 aim to bring greater clarity and consistency to the correction of company records and filings.

The Draft Companies (Annotation and Rectification) Regulations, 2025 (Draft Regulations) introduce a structured framework for correcting, updating or annotating errors or omissions in company registers and official filings. They aim to operationalise the powers granted to the Registrar (pursuant to section 862 of the Companies Act (Cap 486)) to provide a clear and consistent mechanism for rectification of corporate records.

Under the provision of the Companies Act, the Registrar is empowered to remove any entry relating to a company from the register, based on very specific grounds upon application by a person with a legitimate interest. However, the act fails to provide clarity on what constitutes a “legitimate interest”. The Draft Regulations address this gap by defining “legitimate interest”, thereby establishing clear locus standi for persons entitled to apply for rectification – a notable inclusion from the act.

These include directors or former directors, shareholders or former shareholders, administrators or executors of a shareholder’s estate, and beneficial owners of a company. This provision is significant as it creates legal certainty by expressly identifying who has the right to seek the remedy, thereby reducing ambiguity and the risk of frivolous applications.

The Draft Regulations also set out the Registrar’s annotation powers, which is a new mandate that empowers the Registrar to place a note on the register to clarify misleading or outdated information, make corrections, and record the date of entry to address any confusion that may arise from such misleading information. It is worth noting, however, that they do not clarify the legal effect of annotations, such as whether third parties can place reliance on them in commercial transactions.

The Draft Regulations mirror the grounds provided in section 862 of the Companies Act for an application for rectification, including an entry that derives from anything invalid or ineffective, derives from anything that was done without the authority of the company, is factually inaccurate or is derived from something factually inaccurate, or is derived from something that is forged.

However, this scope may be regarded as narrow in that rectification applies only to very limited circumstances and does not extend to material that is simply disputed, subjective, or made in good faith under proper authority. In summary, the mechanism is designed to correct clear errors or wrongful acts rather than to reopen legitimate exercises of discretion or bona fide administrative decisions.

Significantly, rectification is restricted to a period of 12 months from the date of the entry in the register, a restriction which may be viewed as limiting for companies that may only discover errors after this period has lapsed. The limitation may prove particularly problematic where errors or unauthorised filings are uncovered later, for instance during due diligence or financing processes. Such delayed discoveries, falling outside the 12-month window, raise legitimate concerns about the applicability and overall effectiveness of the proposed regulations.

Nonetheless, the essence of the Draft Regulations lies in the procedure prescribed for rectification upon an application to the Registrar. Once an application is made, the Registrar is required to issue a written notice of intention to rectify the register, addressed to the company and the public.

This notice must set out the company’s details, the omitted or erroneous information, the recipients’ right to object (underpinning the right to fair administrative action guaranteed under the Constitution of Kenya), the potential effect of the rectification, and the date of issuance. In addition, the notice must specify the deadline for lodging written objections, being within 28 days from the date of the notice.

Consistently, the right to object is limited to persons with a legitimate interest, who must file the prescribed form setting out their details, identifying the rectification application, and stating the grounds of objection. Where objections are filed, the Registrar is obliged to acknowledge receipt and notify the affected parties accordingly.

Significantly, the Registrar is barred from effecting any rectification once an objection has been lodged whose purpose is to ensure that due process is followed and prevent any administrative discretion by the Registrar. Importantly, however, the Draft Regulations do not preclude the Registrar from referring an application for rectification to the courts and seeking appropriate orders which, by way of extension, broaden the scope of remedies available.

While the Draft Companies (Annotation and Rectification) Regulations, 2025 are a welcome step in clarifying the rectification framework and embedding safeguards aligned with constitutional standards of fair administrative action, their practical impact will depend on how flexibly and efficiently they are applied. Striking the right balance between protecting stakeholder rights and ensuring timely, cost-effective corrections will be critical to avoiding procedural bottlenecks that could undermine the very certainty and reliability the Draft Regulations seek to promote.

The writer is the Managing Partner at Cliffe Dekker Hofmeyr (CDH) Kenya

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