Without any forewarning, the current administration operationalised the 11 years old, Public Benefits Organisations Act which replaces the 30-year-old Non-Governmental Organisations Coordination Act, significantly altering the regulation of not-for-profit entities.
The PBO Act was assented to on 14 January 2013 by the late former President Mwai Kibaki, and its date of commencement was to be determined by a Gazette notice. Since then, and despite multiple attempts to operationalise it, there has been a reluctance by the Government to sign it into law. This all changed when the date of commencement was finally made public last week when the Cabinet Secretary for Interior and National Administration (the CS) published a Gazette notice stating that the PBO Act shall come into operation on 14 May 2024 (the Operational Date).
The PBO Act is intended to revamp the regulatory framework for civil societies in Kenya to create an enabling environment for their establishment and operations. The aim of the legislation is to bring certainty and greater transparency given the challenges that have existed under the NGO Act where the activities of Non-Governmental Organisations (NGOs) have been arbitrarily governed and where there was a pervasive risk of deregistration to “silence” those organisations that spoke out on sensitive topics in Kenya. There is also hope that the new legislation which recognises the important role that civil organisations play in society will help bridge the distrust between civil society and the Government of Kenya.
There are a number of significant compliance and reporting obligations for PBOs some of which are aimed at achieving fiscal transparency. Given the progressive changes in Kenya’s legal framework over the past 10 years and the continued furtherance of transparency, the timing of the PBO Act is fitting as Kenya works to remove itself from the grey list. The grey list is a list of jurisdictions under increased monitoring who are working with The Financial Action Task Force to address strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing. Further information on the grey list is available here.
The intention of the legislation is to streamline civic organisations that engage in public benefit activities under one piece of legislation. It also replaces the NGO Board with the Public Benefit Organisations Regulatory Authority (PBO Authority) which is designed to oversee the objectives of the new legislation.
To qualify as a public benefit organisation (PBO), an entity must be a voluntary membership or non-membership grouping of individuals or organisations which is autonomous, non-partisanship and non-profit making. This moves away from the repealed NGO Act whose focus was on the non-profit making. The PBO Act also lists organisations that do not qualify to be PBOs such as a trade union, a public body ,a political party, a religious organisation which is primarily devoted to religious teaching or worship, a society, a cooperative society, a Sacco society, a microfinance institution and a community based organisation whose objectives include the direct benefit of its members.
It is not mandatory for an organisation to be registered as a PBO; however in order for the PBO to access the benefits that accrue under the PBO Act, it has to be registered under the Act.
To enjoy the benefits under the PBO Act, a civil society that meets the criteria of a PBO must be registered under the PBO Act If an entity is registered under any other statute, it cannot be registered under the PBO Act. However, once an organisation is registered under the PBO Act, its registration under any other statute is superseded by its registration under the PBO Act. For existing NGOs previously registered under the repealed NGO Act, this means that they will need to register as PBOs under the PBO Act within a period of one year from the Operational Date. Failure by an NGO to register within this timeframe, after being given notice to do so, will result in the entity losing its PBO status after expiry of the notice period. Additionally, all NGOs previously exempted from registration under the repealed NGO Act are required to apply for registration under the PBO Act within 3 months of the Operational Date.
Although the benefits in the PBO Act are generally quite broad, in order for some of them to be effective and accessible, additional legislation would have to be enacted. For instance, exemptions from and preferential treatment in relation to taxes have to be legislated and incorporated into tax related legislation. Similarly preferential treatment in public procurement procedures would have to be specifically included in legislation dealing with public procurement. The PBO Act therefore expresses intention to provide certain benefits to PBOs rather than a firm commitment.
The aim of the PBO Act is to provide an enabling environment for civil society actors whilst enhancing self-regulation and discouraging the misuse of public resources. Only time will tell the true impact of the new legislation on civil societies in Kenya and existing NGOs. The CS is required to formulate draft regulations to govern the activities of PBOs. Stakeholders will have a minimum of one month from the notice date to provide their feedback on the draft. It will be important to understand the additional compliance requirements for PBOs that the CS will set out in the regulations and the impact they will have.
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Read the original publication at ALN