KENYA – New Startup Bill will foster Entrepreneurship

By Kenya Gazette Supplement Notice Number 163 of 14th September, 2020, the Kenyan Senate published the Startup Bill 2020.  The publication introduced the Bill as “A Bill of Parliament to provide a framework to encourage growth and sustainable technological development and new entrepreneurship employment, to create a more favourable environment for innovation, to attract Kenyan talents and Capital and for connected purposes”.

Kenya’s technology and IT sectors are fast growing due to technological advancements boosted by infrastructure developments and increasing numbers of international and local investors in the country. This has turned Kenya into a hub for startups in Africa, thereby creating the need for the legal framework for encouragement, registration and incubation of the startups and connect them with private sector investors and financial institutions, research institutions and provide important support at various levels, for the realization and success of the innovative entrepreneurship.

The Kenya National Innovation Agency

The Kenya National Innovation Agency is an agency established under Section 28 of the Science, Technology and Innovation Act.

The Startup Bill 2020 seeks to assign to the Agency various roles, powers and responsibilities; including the responsibility of registration of startups, formulating an incubation policy framework for the development of startups, both at national and county level, and creating partnerships between local and international business incubators.

The creation of incubation programmes at the national and county levels, is expected to support and develop a sustainable and globally competitive technology innovation sector that will contribute to the growth of the economy.

The Bill empowers the agency to subsidise the formation of startups; facilitate the protection of intellectual property of innovations by startups; provide fiscal and non-fiscal support to startups admitted into incubation programmes; and provide support to enable development and growth of startups.

In addition, the Bill provides for the establishment of a credit guarantee scheme for the development and growth of startups, which is expected to provide accessible financial support to startups.

Eligibility for registration as a startup and admission to Incubation programme

Under the Bill, an entity is eligible to be registered as a startup and qualify for admission into an incubation programme if the entity:

• Is newly registered or has been in existence is registered in Kenya as a company, a partnership firm, a limited liability partnership or a Non-Governmental Organization whose shares are majority owned by one or more Kenyans;
• Has its headquarters or a branch in Kenya; and
• Is newly registered or has been in existence for a maximum of seven years from the date of its incorporation or registration unless it is a startup in the Biotechnology sector, in which case it must have existed ten years from the date of incorporation or registration;
• Has the objectives of innovation, development, production and commercialisation of innovative products, processes or services or if it is a scalable business model;
• Is a holder, depository or licensee of a registered Patent or the owner and author of a registered software;
• Has at least 15% of its expenses attributable to research and development.

An entity is not be eligible to be registered as a startup if:

1. It is established as a result of a split, reconstruction, merger or reconstitution of an existing business;
2. It is a holding company or subsidiary of an existing entity that is not registered as a startup.