Registering and Formalizing your Chama

Do you want to register and formalize your group? We delve into how you can legally go through the registration process for your group.

Chamas are widespread because they collectively allow members of different income brackets to face problems and opportunities as part of a group rather than individually.

Formalizing your Chama will enable the entire group to move steps ahead and gain in the future. A Chama can be formalized in two main ways

Registering as an association or as a Self Help Group
Registering as a Limited company or Partnership

In order to achieve the formalization, a Chama needs to consider officials, a postal address, and a physical address including a plot number. The officials need to come from within the Chama to avoid any conflict of interest among the members. Agreement among the members also needs to be reached to avoid any misunderstanding for the future of the Chama. Each individual should be allowed to voice out his /her opinion about the options for the formalization of the Chama.

You can read our initial research on formalizing your chama which we had written sometime back.

Information and documentation needed to formalize a Chama

a) Objectives of the Company, the nature of Business/activities the company shall
Undertake.
b) Names of the shareholders in Full.
c) Names of the Directors in full if different from the shareholders.
d) Postal addresses, Email addresses, and Telephone Numbers of the shareholders and Directors.
e) Number of shares to be held by each shareholder.
f) Copy of ID / Passport of the Shareholders / Directors.
g) Passport photos of the Shareholders / Directors.
h) Copy of iTax PIN certificate of the Shareholders / Directors.

Legal formalization and registration of your group — Use a lawyer to formalize and register your group

Registering the Chama as Self-help group or an Associations

Self-help groups have become a common way to collectively accumulate money and use these funds to benefit members. Many groups have graduated from just the normal contributing groups to investment clubs. This is an indication that Chama’s’ have discovered that there is potential to transform the lives of members from different perspectives.

In order to move your Chama there are a few considerations that need to be addressed by the members’. Before you register your Chama, there needs to be an agreement among members; that all the members share the mission, vision, and objectives of the group to change the Chama and will take full responsibility. This way the Chama members are sure of achieving their desired goals.
There are some sound similarities when registering a Chama to a Self Help Group or an Association.

A Chama group will only be registered if it has ten or more members. The group should have by-laws or a constitution that guides its activities and outlines its membership including the officials of the group.

Ensuring that the constitution is clear and indicates desired objectives agreed upon by the members is mandatory. A registration fee of 1,000 Ksh is required. Every registered group must furnish the registrar with their annual returns at a fee of Ksh100. In the case where the group over time faces changes like; of change of group officials or office titles, a group must notify the registrar within two weeks’ notice. This must be signed by three known officials. Any group planning to amend its constitution or name must obtain permission from the registrar by putting the application in writing and must be signed by three officials — the Chairperson, Secretary, and Treasurer.

The letter of intent must be accompanied with a copy of minutes, which must be certified by the as a true copy of the minutes of the meeting at which the resolution to make the intended change was passed. Every registered group is required to hold an annual general meeting once a year and all members must be invited. The group should also be aware that as they change they will be required to file tax returns thus members need to be informed collectively of the tax laws and any futuristic implications. Failure to file returns is an offense and a group that fails to do the same faces a penalty and can be de-registered. Apart from the annual returns, a group is required to pay other different statutory fees from time to time. These include a change of postal address, a change of officials, a certified copy of a certificate, an application for constitution amendment, an application for dissolution of the group, an application for confirmation letters of group officials, and a name search. These fees vary from time to time.

Registering a Chama as a Limited Company or Partnership

Registration documentation applies across companies, partnerships, associations, and or Self Help groups. When registering a business in Kenya the first thing needed is to conduct a name search. This is a must for all businesses. The cost incurred for each name search will be Ksh. 100 per name and one receive an immediate response. To save time it is advisable to have three names and search them all at once. The company name reservation lasts 30 days and can be renewed for a similar period. The Company Registry requires that a name search be conducted and approved before the registration process of any local business. One can do it online through the e-citizen portal or manually at the various Huduma Centers all over the country.

Limited Company registration process

A Chama needs a memorandum and articles of association which sets out the objectives of the Chama (company) and the internal constitution of the Chama. These documents should be drafted by a registered lawyer who is a current practitioner and is in the current role of a lawyer at the Law Society of Kenya. These costs vary and the current charge is Ksh. 4,500 – Ksh. 100,000.

Forms to be filled out by a Lawyer

Form 208 is a compliance form and should be signed by the lawyer registering the company. Form 201; notifies the registrar of the registered office address of the company, and is to be signed by one director or the company secretary.
An additional form to be filled is form 203; which is filled and signed by a Certified Public Secretary of Kenya (CPS) who must be a current member of the Institute of Certified Public Secretaries (ICPSK). This form covers the particulars of the Chama (company) directors and company secretary.
Note: Only companies with a Nominal capital of over Kshs 500,000 are required to have a Company Secretary.

Stamp Duty

Once the memorandum & Articles have been prepared, all documents should be presented to the registrar of companies for payment of stamp duty. This takes between 1-3 days. Stamp duty will cost from Ksh. 3,150 depending on the Nominal Capital of the Chama (company). Once the stamp duty has been paid, all the documents should be presented to the Registrar of Companies together with forms Form 203, Form 201, and Form 208. Payment of Ksh. 2,800 will be needed and formal registration will take between 3 to 4 weeks.

Registering a Chama as a Partnership

The partnership act allows up to 20 partners to be listed in the partnership. In order to register the Chama as a partnership, the members need to proceed as follows:
a) After the name search, if your chosen name is available for registration you will get a form (Form BN/2) from the registrar of companies.
b) You will need to fill out Form BN/2.

Once completed the form, it should be taken it back to the Registrar of Companies, and a fee of Ksh. 800 will be paid. Registration takes between 2 to 3 weeks.

Registration of a Chama as an Association

Associations are registered under the Societies Act in Kenya by the Registrar of Societies. Consists of at least five persons and not more than forty persons. The members of the association have a common agenda that the association seeks to satisfy. The association by law is required to, within a period of sixty days from the date of its formation, make an application for registration.

Steps to Register

The Chama will go through the same process as a company by conducting a name search as proposed by the Chama. They will also need to draft a constitution and Key officials including the Chairman, Secretary, and Treasurer who have been appointed and approved by the Chama members need to be included in the constitution.

Difference between an Article of Association and a Memorandum of Association

An MOU document contains the basic information which is required for the Chama to operate while the articles of association are the rules and regulations that govern the Chama.

Various company registration documents and sample formats can be obtained from the Attorney Generals’ website.
Please note that the registration fee is subject to change depending on government reviews.

Benefits of registering and formalizing your group

The benefit of registering and formalizing your group into a company or association is that the Chama will be recognized by law and can transact various businesses of choice. The group can also own property on behalf of the members. This gives members a sense of security even as they contribute their money to the group activities and legally binds them to a common goal. It is also important for every registered Chama to be informed about tax implications of their property transactions, especially when they sell it and intend to split the cash.

Debts and other group obligations are the responsibility of each one in the Chama thus if they intend to get any financial aid all members should be in agreement.