Successfully Establishing a Non-Profit Organization in Kenya

Kenya is often the entry point for INGOs operating in East Africa. Its relative size, political stability, and high percentage of English-speaking population offer some reassurances to foreign nonprofits looking to register a local presence.  

These factors, however, are not helpful in choosing what form of legal entity to incorporate with.

Below is a quick overview from TopSource Worldwide’s NGO Services team of some factors to consider in this decision:

A1. Types of Applicable Nonprofit Organizations in Kenya (1) 

 
Trusts have not been considered due to their primary fundraising purpose and due to current political restrictions placed on the incorporation of this entity type. Societies have been excluded as they are not applicable for organizations headquartered outside of Kenya.  

A2. Entity Setup Process for Kenyan CLGs and NGOs 

A2a. Setting up a Company Limited by Guarantee in Kenya 

For submission to the Registrar of Companies and eCitizen portal: 

1. Submit three potential entity names for reservation 
2. Submit the application form 
3. Draft a memorandum for a CLG (Form CR3) 
4. Draft Articles of Association (optional) 
5. The statement of guarantee (provides the amount that each member will contribute towards the assets of the company, and which amount will be used to pay the debts and liabilities of the company in the event of liquidation) 
6. A copy of the National Identity Card or Passport Bio data page of each director and member 
7. KRA PIN certificate of each directors/members and secretary (if any) 
8. Recent colored passport photograph of each director/member and the company secretary (if any) 
9. Each director’s/ member's occupation, residential address, postal address, email address and telephone number 
10. Particulars of the company: postal address, physical address, email address, telephone number 
11. Vetting of submitted documentation by the National Intelligence Service 
12. Registration with the Kenya Revenue Authority (“KRA”) 
13. Application for a business permit 
14. Registration with the National Social Security Fund (“NSSF”) 
15. Registration with the National Hospital Insurance Fund 

For submission to the NGO Co-ordination Board: 

1. Duly filled application form  
2. A certified copy of the constitution of the proposed organization 
3. The names, photographs and email, residential and postal addresses of at least three officers of the organization 
4. The head office and postal address of the organization 
5. The sectors of the proposed operations 
6. The districts, divisions and locations of the proposed activities 
7. The proposed average annual budgets 
8. The duration of the activities 
9. All sources of funding for the organization 
10. The names and addresses of all national and international affiliations of the organization, together with copies of the certificates of incorporation 
11. Vetting of submitted documentation by the National Intelligence Service 
12. Registration with the Kenya Revenue Authority (“KRA”) 
13. Registration with the National Social Security Fund (“NSSF”) 
14. Registration with the National Hospital Insurance Fund (“NHIF”) 

A3. Analysis & Commentary of CLG vs. NGO Setup in Kenya 

The principal difference between these two entity types is the relevant government body that oversees and regulates them. For Companies Limited by Guarantee (“CLGs”) this is the Registrar of Companies -- the same authorities responsible for the incorporation and compliance of for-profit companies in Kenya. Non-Governmental Organizations (“NGOs”), on the other hand, operate under a special bureau called the NGO Co-ordination Board. 

During incorporation, NGOs are required to document: a) the organization’s objects (a maximum of five); b) the Kenyan counties in which it intends to operate (a maximum of five); and c) information on the source of its funding, including proof of funding and projected operating expenditure for the short term. CLGs must have at least one stated objective but are not limited to their operating locations, nor are they required to provide funding information. 

The setup process is lengthy for both NGOs and CLGs, due mainly to the vetting of the proposed organization officials by the National Intelligence Services (“NIS”). The background investigation conducted during this phase is meant to determine the criminal history, political exposure, and any other disqualifying factors regarding the founding members involved in the setup. This vetting process is especially rigorous for CLGs, as authorities recognize that NGOs will continue to be strictly regulated after incorporation, but for CLGs there is a risk the organization will stray from its stated, beneficial purpose upon registration given that their oversight body is also responsible for Kenya’s for-profit sector. The path to corporate income tax exemption is equally difficult, but equally available, for both CLGs and NGOs.  

Most Kenyan nonprofits had historically registered as NGOs, but recently CLGs have become a popular option. One factor driving this is the bureaucracy, which some categorize as politicization, of the NGO Co-ordination Board’s oversight of NGOs. The government oversees appointments to the NGO Board, and within recent years some politically vocal nonprofits have been deregistered as NGOs due to punitive measures imposed by the Board. At the same time, some (unrelated) NGOs have been exploited by directors and officials embezzling and redirecting funds for personal gain, forcing authorities to tighten compliance and audit requirements. Accordingly, more nonprofits have started opting to register as CLGs, though the heightened skepticism in their finances has extended to this entity type. 

The significantly shorter setup time may be attractive for apolitical organizations unlikely to risk censure by the Board. Choosing an NGO would mean that your entity in Kenya could hire its own employees within five months (versus a year with a CLG). However, if the primary purpose of the Kenyan office would be staffing rather than fundraising, hiring staff through a local Employer of Record (EOR, such as TopSource Worldwide) could be a viable short-term solution during entity setup.  

We hope this guide is helpful as you consider setting up a nonprofit entity in Kenya. Please reach out to our General Manager of NGO Services, Aidan O’Neill, at aidan.o’neill@topsourceworldwide.com with any questions or for a complimentary consultation. You can also contact us on the TopSourceWorldwide website to get more information.