LAWS GUIDING THE AQUISATION OF CONSTRUCTION PERMIT BY COMPANIES IN KENYA

As a Chinese investor looking to enter the Kenyan construction market, it is crucial to understand the legal framework that governs the industry at both the national and county levels. Kenya’s construction regulations are designed to ensure safety, quality, and environmental sustainability.

Here is a breakdown of the key laws and regulatory bodies you need to be aware of:

1. National Laws and Regulatory Bodies

The national government, through various acts and bodies, sets the overarching legal framework for the entire country.

• The National Construction Authority (NCA) Act, 2011: This is the primary law governing the construction industry in Kenya. The NCA is a statutory body established under this Act with the mandate to regulate, streamline, and build capacity in the construction industry.² Key functions of the NCA include:
  • Contractor Registration: All contractors, including foreign firms, must be registered with the NCA to operate legally.³ The NCA has different categories for contractors based on their capability and the type of work they can undertake.
  • Project Registration: All construction projects must be registered with the NCA. This involves submitting approved architectural and structural plans, bills of quantities, and other relevant documents.
  • Accreditation of Construction Workers and Supervisors: The NCA accredits and registers construction workers and supervisors to ensure professional standards and accountability.
  • Site Inspections: The NCA conducts inspections to ensure compliance with the law, safety standards, and approved plans.
• The National Building Code, 2024: This code, which came into effect on March 1, 2025, sets the standards for all construction practices in Kenya. It covers everything from structural design and materials to environmental considerations, safety and health regulations, and accessibility. Adherence to this code is mandatory for all new construction projects.
• The Environmental Management and Coordination Act (EMCA), 1999: This Act, overseen by the National Environment Management Authority (NEMA), is critical for all construction projects. You must conduct an Environmental Impact Assessment (EIA) to assess the potential environmental effects of your project. NEMA must approve the EIA report before you can begin construction.
• The Occupational Safety and Health Act (OSHA), 2007: This law governs health and safety on construction sites. It requires you to provide a safe working environment for your employees, conduct risk assessments, and provide necessary safety gear and training to prevent accidents.
• The Public Private Partnerships (PPP) Act, 2021: If you are interested in large-scale infrastructure projects, this law provides the framework for partnerships between the government and private investors for the development and operation of public facilities and services.
• Other Relevant National Laws:
  • The Companies Act, 2015: This law governs the registration and operation of companies, including foreign entities, in Kenya.
  • The Land Act, 2012, and the Land Registration Act, 2012: These laws govern land ownership and transactions in Kenya.
  • The Physical Planning Act, 1996, and the Urban Areas and Cities Act, 2011: These laws provide a framework for physical planning and development, which is essential for obtaining building permits.

2. County Laws and Regulations

In addition to the national laws, county governments play a crucial role in regulating construction within their specific jurisdictions. The Constitution of Kenya, 2010, devolved certain functions to the counties, including physical planning and development control.

• County Government Approvals (Building Permits): Before you can start any construction, you must obtain a building permit from the relevant county government. This permit ensures that your project aligns with local building codes, zoning laws, and land-use restrictions. The requirements for obtaining a permit can vary slightly from one county to another, but generally include:
  • Proof of land ownership (e.g., title deed).
  • Clearance certificate for land rates.
  • Approved architectural and structural plans.
  • NEMA’s EIA license.
• Single Business Permit: Each county issues a Single Business Permit, which is a mandatory license for all businesses operating within its boundaries

Key Steps to Take as an Investor

1. Company Registration: First, establish your company in Kenya, either as a local subsidiary or a foreign branch, in compliance with the Companies Act, 2015.
2. Find a Local Partner (Optional but Recommended): Collaborating with a Kenyan firm can help you navigate local regulations, sourcing materials, and understanding the local market.
3. Engage Kenyan Professionals: You must work with professionals who are registered with their respective professional boards in Kenya, such as the Board of Registration of Architects and Quantity Surveyors (BORAQS) and the Engineers Board of Kenya (EBK).
4. Obtain all Permits and Licenses: Follow the correct order of applications, starting with NEMA approval, then the county government building permit, and finally, project registration with the NCA.
5. Adhere to all Regulations: Ensure strict compliance with all national and county laws, especially concerning health, safety, and the environment, to avoid legal disputes and penalties.

Registering a construction company in Kenya requires meticulous attention to detail and compliance with a complex set of legal and regulatory frameworks. For a foreign investor, navigating this process can be challenging due to unfamiliarity with local laws, language barriers, and bureaucratic procedures.

Given these complexities, it is highly recommended for investors to use the services of a professional business consultancy firm. These firms have specialized knowledge of local regulations and established relationships with key government bodies, which can significantly simplify and expedite the registration process.

 

To register a construction company in Kenya, you must complete a multi-step process that involves registering with several government bodies. The main stages are:

1. Company Registration:
   • Name Search and Reservation: Propose a unique name for your company through the eCitizen portal. The name will be reserved for 30 days once approved.
   • Incorporation Documents: Prepare key documents such as the Memorandum and Articles of Association, which outline the company’s structure and activities.
   • Application Submission: Submit the completed application forms and required documents (including identification documents and KRA PINs of directors and shareholders) to the Business Registration Service (BRS) through the eCitizen platform.
   • Certificate of Incorporation: Once the application is approved, you will receive your Certificate of Incorporation, CR12, KRA PIN, and other statutory numbers online.
2. Tax and Social Security Registration:
   • Kenya Revenue Authority (KRA): Your company will be registered with KRA to obtain a KRA PIN and Tax Compliance Certificate (TCC). You may also need to register for Value Added Tax (VAT) if your annual turnover exceeds the KES 5,000,000 threshold.
   • National Social Security Fund (NSSF) and Social Health Insurance Fund (SHIF): If you plan to have employees, you must register with NSSF and SHIF for their social security and health insurance contributions.
3. National Construction Authority (NCA) Registration:

This is the most crucial step for a construction company. The NCA regulates the industry and categorizes contractors into eight levels (NCA 8 to NCA 1), which determine the size and value of projects a company can undertake.

• General Requirements for NCA Registration:
  • Copy of your Company Registration Certificate (or Certificate of Incorporation) and CR12.
  • Copies of the IDs of all directors.
  • Academic certificates and testimonials for technically qualified directors and staff.
  • Valid KRA Tax Compliance Certificate (TCC).
  • A certified copy of your current business permit license from the county government.
  • Proof of past experience or ongoing projects (if applicable).
  • Proof of ownership or access to necessary plant equipment and machinery.
  • Three years of audited financial accounts certified by an ICPAK member, or other relevant financial information like bank statements.
  • Membership certificate from a contractors’ association (optional but recommended).

4. County Business Permit:
   • You must apply for a business permit from the county government where your company will operate. In Nairobi, this can be done through the Nairobi City County website.
5. Specialized Licenses (if applicable):
   • Depending on the type of work your company will do, you may need additional licenses from other authorities.
   • Electrical or Mechanical Work: You will need a license from the Energy and Petroleum Regulatory Authority (EPRA).
   • Telecommunication and Cabling Work: A license from the Communications Authority of Kenya (CA) is required.

 

Registering a construction company with the National Construction Authority (NCA) in Kenya when there is foreign shareholding involves a two-pronged approach, as the NCA distinguishes between local and foreign-owned firms. The requirements depend on whether the company is considered a local or foreign contractor.

Definition of a Foreign Contractor

According to NCA regulations, a company is considered a foreign contractor if:

1. It is incorporated outside of Kenya.
2. It is incorporated in Kenya, but 51% or more of its shares are held by a non-Kenyan.

If the foreign shareholding is less than 51%, the company is treated as a local contractor, and the standard registration requirements apply.

Requirements for a Foreign Contractor

Foreign contractors are subject to specific and stricter requirements. Their registration is temporary and project-specific. The registration certificate is tied to a particular contract and is only valid for that project’s duration. Additionally, foreign contractors are restricted to a single category: NCA 1, which allows them to undertake projects of unlimited value.

Key Documents and Conditions:

• Company Incorporation Documents: A copy of the Certificate of Incorporation and CR12 (list of directors and shareholders). The NCA will use these to confirm the foreign ownership percentage.
• Work Permits: Copies of valid work permits for all foreign directors and technically qualified staff.
• Proof of Competence: Evidence of the firm’s past experience in other jurisdictions. This can include testimonials, project portfolios, and a certificate of compliance from the country of origin.
• Financial and Technical Capacity:
  • Audited Accounts: Three years of audited financial accounts certified by an accountant registered with the Institute of Certified Public Accountants of Kenya (ICPAK)./for companies old more than one year.
  • Proof of Assets: Certified copies of documents proving ownership of plant, equipment, and machinery.
  • Technical Staff: Academic certificates, testimonials, and CVs for all technically qualified directors and staff.
• Project-Specific Commitments:
  • Award Letter: A copy of the project award letter from the client.
  • Affidavit: A sworn affidavit stating that the company will wind up its Kenyan operations once the specific project is completed and the defects liability period has expired.
  • Undertaking: A written undertaking to subcontract or enter a joint venture with a local NCA-registered firm for at least 30% of the contract’s value.
  • Skills Transfer: A commitment to transfer technical skills that are not available locally to Kenyan personnel.

 

Requirements for a Local Contractor (with Foreign Shareholding < 51%)

If your company’s foreign shareholding is less than 51%, it is treated as a local contractor. The requirements are more straightforward and provide a more permanent status, allowing the company to apply for any of the eight NCA categories (NCA 8 to NCA 1).

Key Documents:

• Company Registration Documents: Certificate of Incorporation and a certified copy of the CR12 (list of directors and shareholders) to confirm the ownership structure.
• KRA Tax Compliance Certificate: A valid tax compliance certificate from the Kenya Revenue Authority (KRA).
• County Business Permit: A certified copy of the current business permit from the relevant county government.
• Academic and Professional Certificates: Copies of academic and professional certificates, CVs, and testimonials for all technical directors and staff.
• Financial and Asset Documents:
  • Audited Accounts: Three years of audited financial accounts or recent bank statements. /for old companies
  • Proof of Assets: A list of plant, equipment, and machinery, with certified copies of ownership documents. /lease agreements
• Specialist Licenses: If applicable, provide licenses from regulatory bodies like the Energy and Petroleum Regulatory Authority (EPRA) for electrical works or the Communications Authority of Kenya (CAK) for communication-related projects.

 

Why use OCL Business Associates?

• Expertise in Local Regulations: OCL Business Associates specializes in business registration, compliance, and licensing in Kenya and the broader East African region. Our expertise can help you avoid common pitfalls and ensure your company is compliant from the outset.
• A “One-Stop-Shop” Solution: We offer a range of services that cover the entire registration and setup process, from company name reservation and incorporation to obtaining tax IDs, business permits, and industry-specific licenses like those required by the National Construction Authority (NCA).
• Streamlined Process: By handling all the paperwork and liaising with various government agencies on your behalf, we can significantly reduce the time and effort you would otherwise spend on the process. This allows you to focus on your core business strategies and project planning.
• Skill Transfer and Local Partnership: As a foreign investor, certain NCA regulations require an undertaking to transfer technical skills to a local firm or individual. A local consultancy can help facilitate this process and ensure you meet this requirement.
• Market Entry and Business Consulting: Beyond simple registration, our firm, OCL Business Associates can provide valuable business consulting services, offering insights into the local market, identifying potential local partners, and advising on the most efficient corporate structure for your investment.

By engaging a professional firm, you gain a trusted local partner who can help you navigate the intricacies of the Kenyan business environment, ensuring a smooth and successful entry into the construction market.