Thousands of businesses will be struck off from the registry of companies as the government starts a clean-up exercise in the department.
The exercise will give the true picture of the formally registered enterprises in the country. The latest measure comes at a time when many businesses, especially the micro and small enterprises (MSMEs) that shut down failed to alert the registrar to strike their business names or companies off government records.
While the Business Registry Service (BRS) Director and Chief Executive Kenneth Gathuma could not put a figure to the number of entities that may be dormant but the records show they are operational. He, however, acknowledges that the number could be significant.
This is on the back of numerous surveys, including some by government entities, which showed that nearly half of small enterprises do not make it past their second year of operation.
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The number of new companies registered this year hit a record high, as Kenyans grappled with job losses owing to Covid-19.
“We are doing data verification of the businesses that are registered in the companies’ registry including these small proprietorships. We will be able to track down who is dormant. This can be established through various indicators, such as companies not filing returns or even one no longer using an address used to register and have not given any change of address,” explained Gathuma.
“It is a data clean-up process which is quite is a monumental process. In the coming year, we should be able to get significant progress and have quite some clarity as to who is still operating as well as who is dormant and ensure that we deregister them so that we have a clean data.” In many instances where entrepreneurs move away from their businesses, few go to deregister their entities at the companies’ registry.
While the Business Registry Service registers about 40,000 private companies annually, the number of firms struck off the registry is between 1,000 and 2,000 per year.
BRS data also shows that about 60,000 business names, largely MSMEs, are being registered annually on average.
A 2016 Kenya National Bureau of Statistics (KNBS) report indicated high instances of businesses shutting down. The report showed that 400,000 MSMEs did not celebrate their second anniversary, raising concern over the sustainability of this key sector.
The report also found that 46 per cent of the MSMEs died in their first year of establishment.
“The trend of businesses that are struck off is not nearly as high as the number of businesses registered. We have not seen people actively come to deregister their businesses as a result of Covid-19,” said Gathuma. The number of new business owners is on the rise this year, with Kenyans adjusting to the loss of jobs or slashed wages owing to Covid-19. Data from BRS showed that the number of business names registered in the quarter to September nearly doubled, growing to 29,900 compared to 15,000 last year.
In the nine months to September, 71,454 business names were registered, compared to 60,312 in the whole of 2019.
Gathuma noted that many Kenyans who had been laid off or experienced a change in earnings, mostly informal employment, had resolved to start their own businesses. “What we know is that a lot of people may have experienced a change in the work status,” he said.