In December 2021, the Kenya Startup Act popularly known as the Startup Bill was passed into law. The Act was created to provide entrepreneurs in Kenya a platform from which they can launch their own companies, facilitate their expansion, and provide technological advancement to both indigenous and foreign investors.
In this article, we will go through the most important aspects of the Startup Act passed into law in Kenya and what the future looks like for startups in the Kenya
Key provisions of the Kenya Startup Act include:
- The Act requires businesses already registered with the Business Registration Service (BRS) to be registered with the Kenya National Innovation Agency (Agency). The Agency is charged with the responsibility of registering new businesses and also designing an incubation policy framework for the growth of these businesses. Additionally, the Agency will be responsible for forging links between local and international business accelerators.
- The Act gives the Agency the power to help start-ups get off the ground, protect the intellectual property of innovations made by startups, give financial and non-financial support to startups that are accepted into incubation programs, and help startups grow and develop.
- The Act establishes a loan guarantee mechanism to help new businesses get off the ground and expand. If this is formed, it will serve primarily to make financial aid more easily available.
- Under the Act, the Agency is required to undertake startup registration and select a Startup Registrar. The Registrar is responsible for maintaining a database of registered startups and conducting evaluations of their financial needs and investment assistance requirements. Venture capitalists and private equity funds will profit immensely from the availability of this information.
Who can register as a Startup?
A company that meets the following criteria will be recognized as a startup and eligible for admission to an incubation program in Kenya:
- is engaged in the innovation, development, production, and commercialization of innovative products, processes, or services;
- is newly registered or has been in existence for no more than seven years from the enactment of the Act ; and for biotech startups, up to 10 years from the date of incorporation or registration;
- is owned by at least one-third Kenyans; is engaged in the commercialization of such innovations;
- is headquartered or has a branch in Kenya;
- must be registered as either a corporation, partnership, limited liability partnership, or non-governmental organization in order to qualify for registration as a startup and admittance into an incubation program.
Incubators under the Startup Act
The Act defines an "incubator" as a company whose primary purpose is to foster the creation and growth of businesses and ideas.
To be approved as an incubator, the entity's structure must include a list of investor businesses and evidence of cooperation with other investors. It is the responsibility of the certified incubator to provide investment possibilities for the private sector, notably venture capitalists.
In addition, the measure proposes to give numerous startup incentives. Examples of such incentives include tax reductions on corporation tax, VAT, specific capital deductions that are particular to startups, and accelerated depreciation for startup-centric gear; nevertheless, more agreements are required to complete a list of incentives that will be effective.
Because startups are unique in that they work in a very unpredictable environment, a provision for quick and cheap firm registration and closure is also being looked at, as is letting people try new things without being punished for it.
What does the future look like in the Kenya Startup ecosystem?
Kenya is no doubt one of the biggest hubs for technology and innovation in Africa and with the passing into law of the Startup Act of 2021, business owners became even more aware of the Kenyan government's interest in making the startup ecosystem more conducive.
In a recent program attended by the president of Kenya in December 2022, President Ruto assured Kenyans of his intention to introduce a new Startup Bill that would help scale up and de-risk startups so as to give them the opportunity to grow into viable enterprises.
This may either imply that there may be a new Kenya Startup Bill of 2023 in sight or an amendment to the existing Act may be put in place in the near future. Whatever the case may be, the grass indeed looks green for startups set up or intending to set up their business in kenya!
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