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INTELLECTUAL PROPERTY FOR THE BEAUTY INDUSTRY

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The beauty industry is comprised of cosmetic and hair product companies, beauty salons, and professional organizations engaged in the business of selling commercial beauty products and services to consumers. The industry also includes colleges and other institutions that offer this service.

 

The structure is such a large percentage of local players are small enterprises that offer beauty services directly to customers. A fairly large percentage includes larger retailers like supermarket, pharmacies and stockists who stock beauty products from multinationals. Importers and local distributors also account for players. Local producers make up a small percentage of players.

 

Business is transacted through various forms. Establishment of physical presence is common with saloons and retail chains. Importers and stockists usually carry out their trade by electronically by establishment of online shops.

 

A common method of market entry for foreign players is by entering into distributorship agreements with interested locals or by establishing a syndicated marketing vehicle such as is used by Oriflame and Tianshi.

 

Intellectual Property for the industry

 

  • In Kenya there is very high competition in the beauty industry. There are many brands whether it’s a saloon, stockist, supplier or manufacturers.
  • There is also a lot of counterfeiting and passing off. The Kenyan courts have made quite a number of decisions in the beauty industry. For example BDF successfully got injunctive relief stopping a competitor from using the mark Niveline.
  • A lot of players like to ride on the success and goodwill of established brands.
  • It is very important to trademark a brand before release into the market to avoid passing off, infringement and counterfeit.
  • It is advisable to register a trademark so as establish a competitive edge over competitors.
  • A trademarked brand is important for marketing and promotional campaigns

 

Form Of Intellectual Property:

 

  • Trademark for the brand owner’s business enterprise
  • Trademark for the brands
  • Trade secrets in the event of sale of service. E.g. trade secret for a beauty procedure
  • Patent for any scientific innovation in the industry
  • Technology transfer agreements
  • Licenses where distributorships are ideal
  • Copyright for websites and magazines
  • Franchises for franchise agreements

Kenyan Intellectual Property Laws

  • The Kenyan intellectual property law is well developed
  • Kenya is a signatory to WIPO treaties.

Conclusion

It is important to contact a lawyer to ensure your brands are adequately protected.

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INTELLECTUAL PROPERTY FOR PUBLICALLY FUNDED RESEARCH

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If you take a look at the vision and mission of most universities it will be to disseminate information for the good of the society. It is therefore inevitable for universities to engage in a lot of research. A lot of other public institutions in various fields also engage in a lot of research and make a lot of findings that are published in journals and other publications. Unfortunately some of this research is plagiarised by other persons who then benefit from this research work.  For example a university makes a presentation at a science congress and a third party manufacturer commercialises their idea without any benefit to the university. The Science, Technology and Innovation Act of 2013 legislates on all research work carried out in Kenya. Under this Act, research committees can be set up for specific sciences. It is now illegal to carry out any scientific research in Kenya without a license. The Science, Technology and Innovation Act streamlines and co-ordinates all research taking place in Kenya. In the past there has been a lot of erosion and plagiarism of research carried on in our institutions. This could be due to lack of regulatory framework seeing that the Science Technology and Innovation Act is a 2013 Act and also lack of good intellectual property law polices when research is done jointly by third parties. Sometimes the research done by universities is undertaken jointly with foreign universities or other entities. Before this Act was passed, what guided the research work was a memorandum of understanding and sometimes a joint venture agreement. These agreements set out the rights and obligations of both parties. However in the absence of a national law to protect the interest of locally done research the risk of plagiarism was still high. The Act therefore protects all research done in Kenya and public institutions that engage in research stand to benefit the more out of the provisions of this Act. The economy also benefits from research work carried out in the country as the same is co-ordinated and centralised.

 

Under the principles of publically funded research, public institutions are encouraged to protect and manage their research work so as to ensure commercial viability of all their research work.  Other than just providing information to the society public institutions should also seek to gain financially from their research work. A university can protect its own research work and own the intellectual property in it. It can then come up with an IP strategy on selling the right in its research to third parties and therefore make extra revenue for itself. The gains made through sale of IP can subsidise the income of the public institutions. Many countries are now coming up with national principles of managing publically funded research to ensure that any rights to the research and benefits from the research benefit the economy as a whole.  In Kenya the good thing is that research is now co-ordinated and centrally managed under the Act. I believe that the relevant regulatory authority that will be formed under this Act will also come up with a national principle of managing all publically funded research to ensure that maximum benefit is made out of all research work carried out in Kenya.

 

In many infrastructure projects which require regulatory approval a lot of time the licenses come with some conditions. I have seen that sometimes that the project owner has to satisfy the regulator as to how the project will benefit the locals.  The same principle of issuing conditional licenses will most likely apply in research licenses.

 

However for now any public institution engaging in research should ensure that it first gets a license for the research it is doing and secondly comes up with a policy of owning the research work and commercialising the same so that research is not only done for purposes of finding information but also to make extra revenue out of its own research.

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COMPULSORY ACQUISITION OF AN INTELLECTUAL PROPERTY

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Intellectual property rights that is patents, trademarks, copyrights, utility models and others, give to the owners an almost monopolistic right over their creations. Generally, no other entity can use those works without permission of the owners. Businesses that secure intellectual property rights, usually attain a competitive or in some cases, monopolistic advantages over their competitors. Under the 2010 Constitution, for the first time, intellectual property rights have been specifically referred to and further, state agencies have an obligation to uphold those rights. Article 40 of the Constitution secures the right to own property and this includes intellectual property rights. It therefore goes without saying that no other entity can derive owners of the benefit of the intellectual property rights.

Patent owners’ rights include the right to make, import, offer for sale, selling and using the products. They also have the sole right of stocking such product and preventing unauthorized use or sale of their products. The rights are however limited and do not include the use of the product for scientific research, use of the articles in Kenya with the permission of the owner and are also limited by any provisions of compulsory acquisition of the product due to public interest and state exploitation of patented inventions.

 

 

However under general IP laws, the government can restrict the IP right by granting to another entity a compulsory license to produce or process the product without necessarily getting permission from the owner. This is especially in the case of life essential products like medicine. Compulsory licensing has its conditions for example the goods produced must be consumed for the domestic market only and not for export. A compulsory license is a forced transaction between a willing buyer and an unwilling

Seller imposed and enforced by the state. Reasons for granting a compulsory includes unreasonably high prices of essential commodities like medicines and also where public policy supersedes the individual rights. In some cases, to encourage competition in the market, the states have allowed compulsory licensing of IPRs to other third parties especially where the grant of the IPR would be uncompetitive and injurious to a market sector. While I am not aware of any antitrust action being filed compelling the respondent to issue compulsory licenses to third parties, there was a ruling in the Constitutional court on the matter of generic ARVs. The Claimants argued that their right to health was in endangered when generic ARVs were banned. The court found in their favor and upheld their constitutional right to health. In cases, like this where a businesses’ IPR is pitted against an individual’s fundamental rights and freedoms then most likely the court will uphold the fundamental rights.

 

While an a patent is generally a reward given to the innovator of scientific and technological inventions, at times the state can limit this right due to public interest. The provisions on compulsory acquisition are found in the Constitution, the Industrial Property Act and international IP treaties such as the TRIPS agreement, which Kenya is a signatory to. So far, I am not aware of any patent or other IP right going through the process of compulsory licensing possibly because there are not that many patents in Kenya.

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THE EFFECT OF COUNTY LAWS ON YOUR BUSINESSS

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The 2010 Constitution of Kenya ushered in a new system of devolved government. It will take a bit of time for the country to fully realise the benefits of devolution, especially for businesses. However there still is a bit of impact of the devolution system on businesses especially as far as county laws are concerned. Most counties have already started enacting their county laws touching on several issues. It is important for your business to get acquainted with the new county laws especially in the counties that your business operates as these laws will definitely impact your business. Today’s business in Kenya is governed by national laws as well as county laws.

 

There is a high possibility that not every county will enact a similar law and thereby you may find that the various counties have differing county laws. This is very significant especially for businesses which are spread over several counties. A business such as this one, may find its operations being affected by different laws depending on the county. County laws should now form a basis for your annual SWOT test. You should be able to analyse the county laws in every county that your business is located and find out what opportunities or threats are being created by such laws. A SWOT test such as this, would be key in decision making for your business. Let us use the hypothetical example of a business in the matatu industry and which plies through the CBD of Nairobi County. Such a business shall definitely be affected by the increased parking levy and should include this in its SWOT. National expansion strategy should also be guided after doing an analysis of the county laws in the host county.

 

Chapter eleven of the Constitution provides for devolution and Article 174 of the Constitution specifically states the goals of devolution. One of the main goals of devolution is to allow some form of self governance. In the month of February 2014, a case filed by 26 petitioners, set precedent in the area of devolution. The case Nairobi Metropolitan PSV Saccos & 25 others Vs. County of Nairobi was a case whereby the petitioners filed a petition challenging the decision by the County Government of Nairobi to increase parking fee. The plaintiffs were PSV operators who felt aggrieved when the County Government purported to increase the parking fee from kHz. 140.00 to Kshs. 300, almost double the rate. They filed the petition in court arguing that the increase was unconstitutional and the main reason for their argument (amongst many other arguments), was that the county government had not given them sufficient opportunity to participate in decision making. They also felt the decision contravened their constitutional rights as consumers. The respondent argued that they had invited the public to participate in the forum and therefore the petitioners had no good claim against the county government. The County Government won the case in a decision that will interest most businesses due to the reasoning behind it.

 

The court’s ruling in this case, is going to set a precedence in devolution. One finding of the court was that Article 10(2) of the Constitution on participation of the people contemplated a participatory democracy that was accountable and made provision for public involvement. What this means, is that your business should participate in public forums organized by your county and should freely give its views.

 

Another finding of the court, was that county governments have exclusive mandate over county transport, which in this case, includes transport. It is therefore important for your business to understand the mandate of the county as they have mandate in some issues such as transport. They are also allowed to impose a levy on services such as parking. This therefore means that most decisions and laws passed at county assembly level are law and are binding.

 

Section 87 of County Government Act which is No. 17 of 2013, sets out the principles of citizen participation in county affairs.

 

I want to therefore urge businesses to take advantage of Article 10(2) of the Constitution and Section 87 of the County Government Act to participate more in county affairs. Remember whatever decisions are made at the county level will have a significant bearing on your business. It is therefore important to participate in public forums held by your county government.

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REAPING THE BENEFITS OF GOING GREEN

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Today environment consciousness is very high among customer’s environment and stakeholders. There is no reason why your business should be left behind in this wave of environmental consciousness. Globally more and more businesses especially in the interiors sector are becoming environmentally conscious. Many interior designers are churning our environmentally friendly products like paints and are also using environmentally friendly raw materials in designing a structure.

 

Going green is not just a fad as it has many benefits for businesses and the public as a whole. The first obvious benefit is to the public. The public stands to benefit in the long run if more organizations adopted environmental conscious policies. One of the major threats to the society is environmental degradation. Going green increases the sustainability and longetivity of the environment. Going green benefits workers and persons in direct contact with your business. Diseases caused by pollutants are significantly reduced when an organization decides to go green. During the industrial revolution, the working conditions were so poor that there was very high mortality arising from dangerous pollutants and emissions. The other category of people that stand to gain when an organization goes green are the end users of the products and services that an organization has to offer.

 

However it’s not only the public that wins from the adoption of environmentally conscious policies. Your business shall also gain from the adoption of these policies. As a direct result of going green, profitability is increased. Adoption of energy saving policies and recycling of waste material greatly reduces costs. A business that uses recycled materials incurs less costs than one that does not. This in the long run increases the profitability of such an enterprise.

 

Going green enhances a business’s ‘public image. The public would like to associate itself with a company that cares about its environment. Going green increases a businesses’worth in the eyes of environment activists. On the converse side a business that is not environment conscious in its operations risks a negative public image and in some cases closure due to actions by activists.

 

Going green enhances the brand image of your business. Products that are manufactured with recycled material or adopt some other form of environment friendly manufacturing process are likely to sell more with persons who appreciate the environment. Lately real estate developers have been putting up units that take into adhere to environmental conservation. These units are really selling and demand for them is high. Going green helps a business differentiate its products from its competitors’. Going green can be adopted as a means of launching different and innovative products in the market. I attended a show where pencils made from recycled newspapers were on sale. The products were different and innovative even to the persons who were not environmentally conscious. Everyone was impressed and the exhibitor made a lot of sales as the concept was innovative.

 

Going green helps a business attain a competitive advantage over its competitors. Every business has something unique about it and if it capitalises on that uniqueness then it can build an advantage for itself. Perhaps it’s time that more Kenyan businesses went green because this is not a concept that has been fully embraced in the market. Going green will help smaller businesses compete with larger businesses that have not adopted environmentally friendly policies.

 

Going green has its indirect advantages in corporate finance and globalization. Investors, particularly foreign investors are more willing to invest in an enterprise that has sound environmental policies. It is ironical that the persons who are most interested with conversation of our own environment are foreigners. Many movies have been made about the struggle between environmentalists and corporates particularly in areas like Lake Naivasha and the Maasai Mara. A business that adopts sound environment policies is bound to have a better rating in the global market.

 

So what should you keep in mind when going green? Firstly it is important to undertake a due diligence on operations and other process of the business to establish sources of environmental pollution and come up with principles that enhance environment conservation. It would be prudent to hire a technical expert in these regards. Some simple steps like using energy saving bulbs would go a long way in cutting costs.

 

It is important to ensure that there is maximum adherence to environmental laws. If a business is in manufacturing or other sector that directly impacts on the environment then the necessary licenses and regulations should be sort. For real estate developers before commencing a development ensure that the go ahead is issued by the regulatory authority. Where possible, the local community should be involved in the project. It is now a constitutional right guaranteed by the New Constitution that everyone has the right to a clean and healthy environment.  Your business can save itself a lot of trouble and litigation by ensuring maximum adherence to the Constitution.

 

The business should then set up the policies, systems and operations supporting its decision to go green. The policies should be sold to staff and other stakeholders. Finally the business should capitalise on the fact that it has gone green in its marketing and advertising strategies so as to derive maximum benefits from this.

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SECURED INVESTMENTS FOR THE DIASPORA

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It is said that Kenyans in the Diaspora bring in billions of shillings every year in terms of investments. Most of them use their contacts here in Kenya, including family members, to transact. A lot of features have been done of late in the dailies about how Diaspora Kenyans are fleeced by their contacts and agents in the country who perhaps take advantage of the fact that the investor is not physically present to follow up the progress of the investment. One story that I read last week in one of the dailies, led me to do this article on how Kenyans in the Diaspora can minimize the risk of losing their investment, by ensuring that all the loopholes are sealed. A lady working in the US started building her home with the hope of returning home. She faithfully sent money every month towards the construction for a number of years. As far as she was aware the construction was going on smoothly and she was even given frequent updates by her family members. In fact she was shown photos of the almost complete house. Imagine her rude shock when she found out that there was infact no construction and that all the money she had been sending had been squandered. According to the feature, this is a common occurrence. Some Kenyans are lucky to have honest and loyal contacts while others like this lady are not so lucky. What really shocked me from this feature is that the investors feel helpless…they have resigned themselves to fate. I therefore decided to write this article to highlight a few ways in which such risks can be minimised. While the options are not exhaustive…they provide some of the steps to minimize this risk.

 

Firstly, if you identify an asset to purchase, if possible ensure that the contract and all other title documents are executed in your name. There have been situations of the agents executing the contract documents in their own names and when the new title finally comes out in the name of the agent, the investor is left helpless and with almost no recourse. This is because the land laws state that whenever a title is issued, the person registered as proprietor of that title is deemed to be the true owner of that property. It doesn’t matter what other arrangements that you had with your local agents, the law is on their side. Therefore ensure that the documentation is where possible, in your own name before sending any money towards the purchase.

 

A second way to minimize risk before sending any money to the local agents is to sign an agreement between you and them. The agreement would set out the relationship between the two parties in so far as the investments are concerned. The agreement should contain a brief description of the intended investment and the manner in which the funds will be sent. The agreement would also contain the obligations and responsibilities of the local agent such that, if he were in breach of his obligations to you then you at least have a document proving the relationship. While most of the monies sent are premised on good faith, it is also important to keep some written evidence. In the event of default by the local agent, then it becomes easier to recover the investment.

 

One of the best ways to minimize this risk is to execute a power of attorney in favour of the local agent. There are two types of power of attorneys, a general one and a special one. The general one enables the agent to do any and all such things required on your behalf. A general power of attorney is not limited to a particular investment but gives the local agent almost unlimited authority. A special power of attorney on the other hand, gives the agent only limited powers and is specific to one transaction or even one aspect of the transaction. A special power of attorney is more favourable than a general one as it limits the agent’s authority and is specific. In the event of any breach by the local agent and if he goes outside his power by doing what he is not authorized to do under the power of attorney, then recovery is easy as the power of attorney is produced as evidence to show that the local agent exceeded his power.

 

It is also advisable to use a lawyer when making any investments. Instead of using the local agent, a lawyer can be used. The beauty of using a lawyer is that in the event he does not discharge his obligation well, then a complaint can be made with the Law Society and it becomes easier to recover against him.

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ADMINISTRATION OF FAMILY OWNED ENTERPRISES

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Family owned enterprises (FEPS) can learn a lesson or two about succession from the manner in which prominent families globally prepare for succession. FEPS are businesses whose ownership is largely or totally controlled by members of the same families. Infact in Kenya, this is the most common form of business, from the small kiosk to the large manufacturing enterprises. A number of listed companies and large multinational companies started out as FEPS and the ownership was passed on to the new generation. There are several FEPS which have lived for over 50 years even as Kenya turned fifty in December 2013. The secret behind establishing a successful FEP lies in planning for succession. This article will show FEPS how to plan for succession in order to build a lasting legacy that will span for generations.

 

One of the challenges FEPS face, is the fact that they are owned by family and they are therefore bound to be affected by familial relationships. When the familial relationships are sour, business becomes hard to do. In one of Kenya’s leading divorce cases, business went sour after the couple who owned a hotel divorced. The court ordered that the business be divided into two by ordering that the shareholding in the company be split 50-50. It is truly a difficult situation for the business which is further compounded by each party competing with the other over petty issues. King Solomon in his wisdom made a similar order in 1st Kings 3:16. Two women were fighting over a baby each one claiming the baby was theirs. King Solomon ordered for the baby to be cut into two, so that each woman would go away with her half. The real mother of the child was heartbroken by the order because she knew the baby would die. She said to herself she had rather let her competitor go with the live baby rather than each going with half of a dead child. This is the unique situation some FEPs face. When the familial relationships are strained and each party is clamouring for a share of the business, the business is bound to die. There are several cases especially of large retail outlets where strained family relationships strain the business. Therefore for your FEP to live for generations what do you do?

 

I would first advice the owners to do a shareholders’ agreement. This is an agreement that is legally binding between the parties and can be as detailed as possible. One of the important clauses of this shareholders ‘agreement would be the dispute resolution clause. Dispute resolution for FEPS is very sensitive given that the relationship goes beyond the boardroom. Your lawyer will be able to make a dispute resolution clause that is customised to include your unique needs. I remember the soap opera called the Bold and the Beautiful vaguely. In one of the scenes, one of the sons of the rich family wanted to marry a woman whom the mother viewed as a gold digger and who was out to gain from the business. The scenes were quite dramatic and all kinds of conspiracies were hatched by the rich mother and the so called gold digger as well. This would all have been cured by a shareholders ‘agreement. Perhaps the founders would have more say on who can join the company as a shareholder.

 

I would also advice the FEP to begin preparing for succession early. We all plan for our retirement and have pension plans and other retirement packages in place. We should also begin planning our FEPs for succession. There is that age when one is not as active as they used to be and want to hand over the company to their children. It would not be prudent to do this abruptly. One can begin grooming a successor even from an early age. How do you do this? You should first identify the successor and let all others know the chosen successor. Many disputes that arise from FEPs is when the family begins fighting over who the successor would be. It would be prudent to appoint a successor. A number of legal instruments would help you achieve this goal. One is to expressly cede your shareholding in the business to the chosen successor by means of a will. Once the successor is chosen, then you begin mentoring the successor and even training them. I have seen an interesting trend in Kenyan professionals. If your father is say a doctor, they will prefer you to do the same course. Why is this? I believe at the back of their minds they are looking for a successor. It is therefore important to groom the successor by training them professionally and even mentoring them. The founder of Apple Inc, Steve Jobs did exactly this when he started grooming his successor early enough. He let his successor make key decisions, with his overall guidance. In FEPs it would be prudent for the founders to let the successor begin running the business and maintain an oversight role.

 

One of the main challenges of FEPs occurs when the founders want to stay in power for too long. There comes a time when power should be shared and you can include your successors in decision making. The timing has to be just right. If it is done prematurely, the inexperience of the successor will be a stumbling block. If done too late, the successors may lose interest altogether and go on to something else.

 

It is therefore my advice for FEPS to begin planning for succession early enough and also engage a lawyer to help them with the planning. Use legal instruments such as shareholders agreements to ensure the FEP is well managed.

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The Introduction of a Family Office

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One of the main concerns of very wealthy families in Kenyan society is how to establish and maintain a legacy for their children and for generations to come.  A lot of wealthy families incorporate their children into family owned enterprises to ensure that the legacy is maintained. While it has worked well and a number of legacies have been established in such manner, family owned enterprises have their own unique challenges including succession issues and capacity issues. Sometimes lack of proper preparation of the heirs to the family owned enterprises or even lack of a suitable heir may mean the destruction of the legacy. This is also apparent in royal lineages, where an unsuitable heir could mean the beginning of the end of the dynasty that may have lasted for generations. Other than family owned enterprises there are many other tools that wealthy individuals use to establish and maintain their legacies.

 

However a fairly new concept will soon be available for wealthy Kenyan families seeking to maintain their legacies. The concept was introduced to me by a family office expert, Mr. Sunil Sanger of Orion Advisory Services and when he took me through the concept I felt that it is a very timely concept for wealthy Kenyan families, who sometimes do not optimize on their wealth due to lack of expert advice.  According to Mr. Sunil, the family office has not yet taken root in Kenya but is common in other jurisdictions.

 

A family office is an enterprise that manages all the investments and trusts on behalf of a wealthy family. It is specifically set up for that purpose and in the event that it is incorporated as a company, the objects would be very specific that the company has been set up to manage the assets of the wealthy family. Family offices provide a number of services to wealthy families but mainly provide investment and financial services at a flat fee.

 

Unlike a personal financial advisor, the family office expert takes time to understand the history of the family, the family members, the goals, values and principles of the family and incorporates all that when he is offering investment advice. A family office expert goes deeper than a personal financial advisor. In terms of say the nature of the family, the family office expert would draw up property pre-nuptial agreements for any of the children of the family wishing to get married. In terms of incorporating the family’s values and goals, a family office expert would know which investments to avoid taking into account the family’s goals. This value addition is not available with personal financiers.

 

A family office takes away from the wealthy family, the headache of day to day management of their wealth and leaves all that to an expert to handle. All the family needs to do is relax and reap even more benefits from their vast wealth.

 

Family office experts are trained in finances and investments. Some of the advice a family office expert would give is on diversifying a family’s portfolio to include assets like stocks, investment in kind and others. They make their decisions based on their expertise and considering the family’s goals.

 

They also incorporate offshore trusts for the family to ensure that all the wealth owned by the family is not limited to one jurisdiction. This is prudent especially in times when the political climate is uncertain.

 

Family offices also include an element of proper estate planning using tools like trusts to ensure that the family’s wealth is at optimum level. They manage the tax aspects and costs to the family to ensure that these are kept to a minimum. A family office will ensure that the wealth of the family is not squandered and that costs are kept to a minimum. Some family expenses like holidays and ceremony expenses like weddings, are all handled by the family office in a professional manner. Some family offices go a step further and incorporate lawyers, financial experts, property managers and others so that all family professional needs are handled from the family office

 

Some very wealthy individuals like Oprah Winfrey have sought the services of family office experts to manage their large fortunes. The Rockefeller foundation could be one of the earliest models of this concept. The foundation was began in 1882 to manage family wealth and bring family cohesion. Almost 120 years later, the Foundation lives on

The cost of running a family office would not be too much so as to overweight the benefits. The value addition is a plus and the time saving aspect of a family office is also attractive.

It is time to consider setting up a family office and engaging experts to maintain your legacy for your benefit and benefit of future generations.

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Fair competition as an agent for innovation

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The much awaited Competition Act comes into effect on the 1st August 2011. The coming into force of this legislation is a major win for businesses as it encourages and promotes fair competition in the market. Fair competition is beneficial to the economy as it encourages innovation across all sectors. This in turn leads to improved quality of services and products. Consumer rights are enhanced in a competitive market; there is also a lowering of prices and diversity of choice when a market is competitive. Initially Kenya’s competition laws were largely contained in the little applied or known Restrictive Trade Practises Act.

 

The new laws are wider and legislate on unfair trade practises, mergers and consumer laws. The Act was specifically enacted to promote competition in the market, protect consumers from misleading market conduct as well as establish a competition authority.

The Board’s wide powers

The new Act is welcome and well drafted leaving little room for ambiguity. The definitions are clear and detailed. A predatory practise has been defined; dominant persons have also been defined while competition and competitors have also been defined in the Act. Such definitions are important to avoid ambiguity when interpreting the laws. The Act has also expressly stated that in the event of conflict between it and other written laws (save for the Constitution) then the Competition Act prevails. This means that any other laws that encourage anti competition action are inferior to the competition laws. The Competition Board therefore has a lot of powers in regulating the market when it comes to competition. However I believe that it is equitable for the competition laws to be read together with the Constitution. This means that in exercising its wide authority the board should be careful not to do anything that would be interpreted as unconstitutional. It would be of interest to practitioners and stakeholders at large to see how conflicts in the interpretation of laws between competition law and other laws will be handled. The Act states that competition laws super cede any other laws in the event of conflict between the two laws.

The Board’s jurisdiction goes as far as extra territorial business operations so long as the transaction has a Kenyan aspect of it.  This means that foreign companies doing business are under the jurisdiction of the board in as far as competition and consumer laws are concerned. It is therefore important for businesses to ensure adherence to this law.

 

Persons whom the law may significantly affect

Marketing, sales and advertising executives will be affected by the new laws. The advertisements should be fair and not misleading. By all means a proper balance is to be struck between sales and consumer welfare. The Act specifically states that the board may participate in formation of consumer bodies. I believe that these consumer bodies will act as watchdogs and will be very instrumental in referring causes to the tribunal. For example when an advertisement fails to mention the risk posed in consuming the product or in some cases over glorifies the product when in reality this is a sham; such misleading advertisements may form the subject of a competition tribunal.

 

Others that need to know this law are businesses that occupy a dominant market position by virtue of holding more than 50% of the market share. Some of the common marketing strategies that have been in use by these market leaders may now be deemed to be anti competitive under the Act. Practises like imposing unfair selling prices on consumers may now be interpreted as uncompetitive. A good example is the unjustifiable matatu fare hikes by the matatu owners association. Other actions that market leaders should be wary of include limiting production, discrimination and abuse of an intellectual property right amongst others. Abuse of intellectual property rights may come in when there needs to be a balance between public good and ownership of the right. A good example of how this comes in is when persons register trademarks without the intention if ever using them at all. The fact that one is an IP right holder means that nobody else is allowed to use a mark that is similar to theirs. However when it comes to competition laws such abuses are outlawed.

Provision for exemptions

There are a few exemptions granted under the Act for example where a professional association locks out some members so as to maintain its reputation or perhaps where disciplinary action is taken out against some errant members. Then this is not deemed to be anti competitive. Either way, the professional association must apply for the exemptions under the Act.

 

In general the law is well drafted and will significantly affect the market. Consumers have a reason to smile while businesses may have to restructure their systems and operations to be in tandem with the new laws.

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ASTUTE REGIONAL BUSINESS EXPANSION

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Africa is a frontier market and has attracted a lot of global attention in this decade. Kenya is East Africa’s largest economy and is receiving a lot of attention from foreign investors as is the rest of the region.  Perhaps this new trend could create opportunity for your business to expand. A lot of businesses are undertaking a continental and regional expansion. Recently, a number of large businesses from South Africa and Nigeria, Africa’s leading economies are setting up in Kenya.  It is now easier to undertake a continental expansion than it was a few decades ago when the political and regulatory environment in Africa was hostile.

 

This is a simple guideline on what you need to look out for if you decide to expand your business geographically to other African countries. You could still opt to expand by forming an alliance or distributorship agreements. Expert advice of a financial analyst, lawyer and other experts will of course be required to give more detailed advice on how to go about a specific expansion.

Before you can expand regionally, it is important to have an expansion plan which sets out the reason you would like to expand your business. There are many reasons why businesses expand. Some reasons could include a hostile domestic market, taking advantage of opportunities in foreign markets, growth and stagnation in domestic market and brand visibility. If the goals and objectives of the expansion are sound then it is easier to determine which countries would be most ideal for expansion.

 

Once you identify potential host countries then you need to undertake a proper market research and also a detailed due diligence on the selected countries.  The following analysis is very important in undertaking this research. One you should understand the host country’s political environment and also analyze its policy towards foreign businesses. While you would rarely find a country legislating against foreigners, the attitude of the country towards foreign nationals ought to be considered. There are countries whose general culture is hostile and xenophobic against foreigners. Last week, the Government of South Sudan expelled foreign workers therefore affecting many foreign businesses that had invested in South Sudan. Therefore you should also analyze the risk of doing business in a selected host. The risk could be political, cultural, competition and regulatory. If the risk outweighs the benefits then it might be safer to avoid such a host altogether. Some countries have a lot of insecurity and this could pose a real risk for your business.

 

When doing a legal analysis of the selected host, you need to firstly understand its Constitution. Almost every country has a Constitution and most constitutions are the supreme law of the land. You must also understand the laws on the sector of business you intend to enter into and ensure that your business is able to meet these requirements before venturing out. It is important to analyze the ease of business formation in the host country and what the host’s policies are in terms of foreign companies. For example what is the cost of doing business, what is the tax payable and what other liabilities will your business face as a foreign entity.

 

The issue of work permits and immigration has to be met before you can physically establish presence in the host, otherwise your foreign employees risk being imprisoned. There are many more legal issues to analyze before expanding and your lawyer can advise of this.

 

Regionally, it has become easier to do business due to a number of regional treaties that provide for cost reduction and harmonization of business procedures. For example, the ARIPO treaty enables your business secure some types of intellectual property in member states by originating a Kenyan filing.  The Ministry of Trade should be a good resource on the treaties on trade and commerce.

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