MasiboLaw

The Startup Bill 2022 is poised to transform the way startups, particularly early-stage startups operate in Kenya forever. The Bill which is set to become law this month is touted to be a framework for offering support, funding and a conducive environment for tech-entrepreneurs in Kenya. This can also be seen as a strategic move to position Kenya as a leader in the African startup ecosystem.

Here are some key highlights of the Bill;

1. Establishment of the Kenya National Innovation Agency

The Bill grants powers to the Kenya National Innovation Agency (KNIA) which is founded on the Science Technology and Innovation Act to supervise its implementation. The Agency will be tasked with overseeing government-backed startups while granting them access to financing, knowledge as well as protecting their intellectual property rights.

2. Financial and Non-Financial Aid

The Bill makes it simpler for entrepreneurs to receive financial aid by introducing a loan guarantee structure for eligible startups. The bill proposes to establish credit guarantee programs aimed at providing businesses with readily available funding, enabling entrepreneurs to obtain low-interest, collateral-free loans and improving their capacity to handle risks and finances. This can help reduce the number of startups closing down due to financial challenges.

Additionally, the Agency will facilitate applications for grants, subsidies, and other forms of financial aid from financial institutions, investors, and research groups, in addition to the public and private sectors. It will also offer non-financial assistance to startups in the form of training programs and coaching.

3. Tax Incentives.

Startups that register under this Bill will benefit from tax breaks, which will alleviate the financial pressure during the critical early stages of business development.

4. Certification of Incubators

One unique thing about this Bill is that it creates an opportunity for more people and institutions to apply and be certified as Incubators for startups. It is not immediately clear how this provision will impact already registered incubators and accelerator programs. The government will probably make this certification a requirement for any entity to operate as an Incubator in Kenya.

5. Eligibility

The requirements to be eligible for registration as a startup and admission into a government incubation and financing program include:

1. The business must be registered as a Company, Partnership, Limited Liability Partnership (LLP), or Non-Governmental Organization (NGO) in Kenya.
2. The business must also be newly registered or have existed for no more than three (3) years, or five (5) years in the case of biotechnology startups.
3. The business must have as its primary goals the development, production, improvement, and commercialization of novel products, processes, or services using a scalable business model.
4. The business must have its headquarters in Kenya and it must be owned entirely by one or more Kenyan citizens.
5. The business must not be distributing profits at the time of the application.
6. Controversially, the business must be the owner and author of a registered software product, and the holder, depositary, or licensee of a registered patent.
7. The business must allocate at least fifteen per cent (15%) of its expenses to research and development of its product/software.

This Startup Bill, if implemented properly, will usher in a new age for startups and entrepreneurs in Kenya. It has the potential of helping entrepreneurs, especially those outside Nairobi and other major cities to access the funding, knowledge and support they need to scale their businesses.

The writer is a lawyer and licensed patent agent who specializes in offering legal services to technology companies and people in technology, you can contact him through info@masibolaw.co.ke