From NGO to PBO Kenya's Big Shift For Non-Profit Organization is Underway

MMA Advocate Faith Cherop

By Faith Cherop
Advocate | Dispute Resolution

Introduction

The Public Benefit Organizations Act 2013 (the Act) was passed into law and assented by the president in 2013. The Act had however been suspended in limbo as it did not have a commencement date. Recently, via Legal Notice No. 78 of 2024, the Act was operationalized with effect from 14th May 2024 in compliance with the various Court Orders and Rulings. This ushers in a new frontier in which Non-Governmental Organizations, now to be referred to as Public Benefit Organizations will be governed by. As a result, the Non-Governmental Organizations Co-ordination Act (the Repealed Act) stands repealed by the Act. We will proceed to interrogate the contents of the Act.

Objects and Purpose of the Act

The Act aims to regulate and provide a framework for the establishment and operation of Public Benefit Organizations (PBOs) in Kenya. The Act defines PBOs as a voluntary membership or non-membership grouping of individuals or organizations, which is autonomous, non-partisan, non-profit making, and which is autonomous, non-partisan, non-profit making and: organized and operated locally, nationally, or internationally; engages in public benefit activities in any of the areas set out in the Act and, is registered as such by the Public Benefit Organizations Regulatory Authority (the Authority).

The Act defines a public benefit activity as an activity that supports or promotes public benefit by enhancing or promoting the economic, environmental, social or cultural development or protecting the environment or lobbying or advocating on issues of general public interest or well-being of the general public or a category of individuals.

The Act also aims to:

  1. Encourage and support public benefit organisations in their contribution to meet the diverse needs of the people of Kenya through creating a conducive working environment, establishing a regulatory and administrative framework, promote a spirit of co-operation and shared responsibility
  2. Promote development of self-regulation among PBO’s.
  3. Promote compliance by PBO’s with their legal obligations.
  4. Facilitate establishment and growth of PBO’s to generally strengthen civil society.
  5. Give meaningful protection to the internationally recognized freedoms of expression, association and peaceful assembly.

Registration

Registration of a PBO is required to be carried out in accordance with the Act. An application for registration is made to the Authority accompanied by the following documents:

  • A copy of the constitution or other constitutive document of the public benefit organization.
  • Names and addresses of the founders of the public benefit organization.
  • The public benefit purposes for which the PBO is organized and operated and all principal activities the PBO shall be engaged in
  • Physical and postal address of the principal place of doing business of the PBO
  • The prescribed fee; and
  • Any other particulars or information as may be required by the Authority.

With regard to an International Non-governmental Organization, it shall be registered through lodging an Application form, proof of it as a legal entity in another country and, the organization’s address in Kenya together with a written statement from a representative with authority at the Headquarters of the Organization with the Authority.

The Authority then considers the application for registration within sixty days and once satisfied, registers the organization as a PBO. In the event the Authority is not satisfied, it communicates the same to the applicant in writing of the decision with reasons and a period of thirty days from the date of the notice for compliance to take effect. Failure to comply would result in the Authority refusing to register the organization with the
applicant notified in writing of the decision together with the reasons for refusal.

Once a PBO is registered, a certificate of registration is issued by the Authority in the prescribed form which is conclusive evidence of the authority to operate throughout Kenya as specified in the constitution. On registration, a PBO is a body corporate with perpetual succession capable of:

  • Suing and being sued;
  • Taking, purchasing, acquiring, holding, charging or disposing movable and immovable property;
  • Entering into contracts; and
  • Performing all acts necessary for proper performance of its functions under the Act.

International Organizations

International Organizations are required to apply to the Authority for a certificate to operate in Kenya. On receipt of the application, the Authority shall:

  • Exempt the organization from registration and grant a permit to operate in Kenya in the event the intended activities or programmes are not directly implemented in Kenya or operate from Kenya and implement the activities or programmes in another country; and
  • Require the organization to apply for registration as an international organization where the organization intends to directly implement its activities or programmes in Kenya or operate from Kenya to implement activities or programmes in another country.

The Act further prescribes the need for the international PBO to have at least one-third of its directors as Kenyan citizens who are resident in Kenya and maintain an office in Kenya.

Transitional provision

The Act includes a transitional provision that organizations previously registered under the NGO Co-ordination Act will now be deemed registered as PBO with the provisor that they seek registration as a PBO within one year from the commencement date of the Act. The Act further stipulates that should the PBO not apply for registration under the Act within thirty (30) days after expiry of the specific notice period, it shall cease to have PBO status or equivalent status. Organizations that had been exempted from registration under the Repealed Act are now required to apply for registration within three (3) months from the commencement date.

Recently, the Government vide Gazette Notice No. 6255 dated 16th May 2025 extended the transition period under Regulation 5 (1) of the Fifth Schedule of the Act for a further one year from 14th May 2025 until 13th May 2026 which gives organizations room to comply with the requirements under the Act.

Benefits of the PBO status

A variety of advantages are available to organizations which obtain PBO status including:

1. Tax sector

a. Tax exemptions in the following areas:

  • income tax on income received from membership subscriptions and any donations or grants;
  • income tax on income acquired from the active conduct of income producing activities if the income is wholly used to support the public benefit purposes for which the organization was established;
  • tax on interest and dividends on investments and gains earned on assets or the sale of assets;
  • stamp duty; and
  • court fees.

    b. Preferential treatment under value added tax (VAT), and customs duties in relation to imported goods or services that are used to further their public benefit purposes;

    c. Incentives for donations by legal and natural persons;

    d. Employment tax preferences and;

    e. Special tax incentives for donations to form endowments, prudent investment policies, etc.

    2. Provision of direct government financing for public benefit organizations that partner with the government, via budget subsidies, grants for specific purposes, and contracts to perform certain work.

    3. Preferential treatment in public procurement procedures and bidding for contracts.

    4. Provision of information to enable public benefit organizations to contribute effectively to the policy processes.

    5. Access to training courses that are relevant to public benefit organizations and offered by government institutions.

    Other Provisions

    The Act establishes the Public Benefit Organizations Disputes Tribunal which shall have jurisdiction to hear and determine disputes arising from breach of the provisions of the Act excluding criminal matters.

    It further provides for the establishment of the National Federation of Public Benefits Organizations (the Federation) which is an umbrella organization of all PBO’s and selfregulation forums of the PBO’s. The Federation has been established to be a body corporate capable of suing and being sued, acquiring and purchasing property and entering into contracts. Its functions include providing leadership on the public benefits organizations sector, promote self-regulation, advise the Authority on development of the sector and facilitate capacity building.

    The Act outlines offences and penalties for persons who:

    • forges or utters any document for the purposes of procuring registration;
    • makes a false statement in respect of an application for registration;
    • makes any material false statement in any document submitted to the Authority;
    • fraudulently holds out any organization as being registered under this Act;
    • fraudulently makes use of a registration number, registration certificate or any information contained in a registration certificate, commits an offence and is liable, on conviction, to a fine not exceeding three hundred thousand shillings, or imprisonment for a term not exceeding two years, or both.
    Conclusion

    In conclusion, the implementation of the Public Benefit Organizations Act in Kenya represents a big step forward in the country’s regulation of not-for-profit organizations. The Act establishes and operates a structured framework for public benefit organizations (PBOs), providing benefits such as tax exemptions, increased credibility, financing availability, legal protection, and possibilities for networking.

    To maintain their PBO status, organizations registered under the Act, including those transferring from the NGO Co-ordination Act, must comply with the registration requirements within the stipulated periods. International organizations wishing to operate in Kenya must adhere to the Act’s registration requirements to establish a legal presence in the country. Overall, gaining PBO status under the Act can provide a number of benefits that promote philanthropic organizations’ growth, sustainability, and effect in fostering economic, social, and cultural development in Kenya.

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