An overview of the Kenyan Startup Bill, 2021

The Startup Bill’s main aim and objective is to oversee the interactions between the state/government, incubators, start-ups, and potential investors as well as provide a network in the startup ecosystem that encourages the growth and development of startups. It will provide a link for the startups with both capital, investments and research opportunities.

It further seeks to attract Kenyan talents and capital while promoting the creation of employment, entrepreneurship and wealth creation.

The Bills objectives are in tandem with promoting Kenya’s place as a regional leader in the African startup ecosystem and the role that sustainable policies driven by incentives for startups, investors and other stakeholders play in creating an enabling environment for these businesses to thrive.

Objectives of the Bill

The Bill seeks to inculcate a culture of innovative thinking and promote entrepreneurship by startups whilst ensuring compliance with the registration and set up requirements set out. It also seeks to provide a linkage for investors, financial institutions, research and development institutions as well as providing an enabling environment for the startups to thrive in Kenya. This will involve having a solid regulation that provides for uniformity in the conduct for startups and incubators at the County and National government level.

The Bill also seeks to establish incubation centres both at the County and National Government level to promote innovation, oversee the transfer of technological advancements and innovation as well as promote employment and wealth creation.

Highlights of the Bill

1. Role of the County and National Government in the Startup Ecosystem

The two levels of government have been tasked with;

a. Establishment of the incubation programmes and development of policy frameworks for the startup and incubation system;

b. Creation of an enabling environment for the promotion of incubation programmes;

c. Keeping and inventory of all startups and incubators within their jurisdiction;

d. Supporting research and development activities within the startup ecosystem;

e. Development of standards and guidelines that will regulate the relationship and linkages between an incubator and a startup; and

f. Provision criteria for evaluation of structures and entities as well as programmes in implementing the Act.

The Bill provides for the registration of startups which shall be done by the Office of the Registrar of startups the Kenya National Innovation Agency (This Agency is established under Section 28 of the Science, Technology and Innovation Act). Further, the registrar shall keep a database of all registered startups, shall be involved in the supervision and conduct of startups as well as coordinate the functions of the County Registrars at the County level.

2. Eligibility of a startup to be admitted into an incubation programme

For a startup to be eligible for admission, it:

a. Must be registered in Kenya either as a Company, Partnership, Limited liability Partnership and Non-Governmental organization;

b. Must have been in existence for less than 7 years since incorporation but an exception has been made for startups in the biotechnology sectors where the period is 10 years from the date of incorporation or registration.

c. Has its headquarters in Kenya and in majority owned by one or more Kenyans;

d. At least 15% of its expenses are research and development centered;

The Bill has expressly provided that it will not apply to subsidiaries or holding companies of existing entities or an entity established as a result of a split, reconstruction, merger or reconstruction of an existing business.

3. Establishment and obligation of incubators

The bill tasks the Registrar and Country Registrars in the licensing and approval of incubators under the Act.

4. Incentives for startups

The Agency as well as the County Executive Committee Member in charge of startups in a county government has given on incentives for startups to include, a subsidy programme for formalization of startups, protection of intellectual property rights for the startups; fiscal and non-fiscal support for startups admitted in incubation programmes, provides support for research and development activities.

Further, there shall be established a credit guarantee scheme for startups whose main aim is provision of easily accessible financial support for startups, guarantee for investors, availing of financial and credit information for startups, and capacity building for startups as well.

The Agency has been tasked with facilitating startups in the application, filing and registering intellectual property as well as institution of legal action for any alleged breach of such rights.

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