The C M Legal Issue is a newsletter owned by C Mputhia Advocates and its vision is to keep you informed. C Mputhia Advocates' vision is to be a leader of change and growth in the legal and business environment and this publication is one of the tools we use to achieve this.

1. C. MPUTHIA
ADVOCATES
Innovative legal solutions
Welcome to the inaugural issue of this newsletter, The C M Legal
Issue. The C M Legal Issue is a newsletter owned by C Mputhia
Advocates and its vision is to keep you informed. C Mputhia
Advocates' vision is to be a leader of change and growth in the
legal and business environment and this publication is one of the
toolsweusetoachievethis.
In our inaugural issue, we have carefully picked out topics that
changed the legal scene in 2014 and those that are likely to
change the legal scene in 2015 and beyond. The Capital Gains tax
comes into force this year. Find out how it will affect your
businessinthisissue.
Welcome to the first edition of our monthly Journal
The C.M Legal Issue
There has been a lot of controversy around the Security Bill. However is this controversy merited? In
this issue we give you salient provisions of this Bill and the new provisions it contains. It is now illegal
topublicly stripa womanongroundsofmodesty(there shouldbe a causeforcelebration).
Many people pass themselves off as psychologists and counselors but fortunately there is a law that
regulates this sector to ensure that you are protected. Learn in this issue who a
counselor/psychologistlegally is.
From our family law kitchen, we have two topics of interest. Before you tie the knot……consider
signing a property pre-nup as the Matrimonial laws for the first time recognize property pre-nups in
Kenya. Estate planning is a new concept in Kenya…..we take you through Njenga Karume's estate
planning asan exampleofgoodestate planning.
Advocates like Yours Truly, are now regulated in the use of social media…….before you touch the
“post”or“share”think twiceonthe implicationsifyouare an Advocate.
Join us in this learning experience…..at C Mputhia Advocates, we add value. Our duty is to keep you
updatedonany legal changesthat mayaffectyouoryourbusiness.
Yours Truly
Cathy Mputhia
EDITORIAL

2. LSK REGULATES LAWYERS’ USE OF SOCIAL MEDIA
The use of social media by advocates is now
regulated as the Law Society of Kenya chose to
adopt the International Bar Association's
Principles on Use of Social Media by the Legal
Profession. The LSK is mandated by statute to
regulate the profession from time to time and
therefore the directive by LSK to all advocates to
adhere to these principles is binding. It is now
tantamount to professional misconduct if an
advocateuseshissocialmediacontrarytothe
guidelines. The legal profession through the LSK is the first professional
association to regulate use of social media and perhaps other professional
associations as well as institutions can borrow from these guidelines. The
guidelines aim to promote and encourage professional responsibility in the usage
ofsocialmediaby advocates.

3. The IBA has set out 6 principles the first one being
on independence. Use of social media should
ensure that advocates are impartial in giving
advice. Advocates are advised to consider the
implications of an online relationship on their
partiality. For example would it be appropriate
for an advocate to befriend a judge hearing his
matter, on Facebook? The rules do not give
examples or specific instances of relationships
that wouldbe consideredinappropriate.
Lawyers are expected to uphold professional integrity when using social media
and ensure that all their social media dealings uphold the integrity of the
profession. Lawyers are therefore discouraged from posting unethical or
unprofessional posts that are likely to go viral. This again is subject to debate. There
is no clear line between personal ethics and professional ethics. There are instances
of some advocates or upcoming advocates being caught up in scandals bordering
on personal ethics and morality. Many advocates are public figures and it is
inevitable that their personal lives are constantly subjected to public scrutiny often
through the socialmedia.
Lawyers are encouraged to use privacy settings for their accounts and also
constantly review social media content. Where a lawyer presents himself as an
online legal professional then he has to clarify to the public whether his comments
are to be relied upon as professional advice. Advocates should adhere to the
Advocate's Act in use of social media as regards advertising. Lawyers are required
to uphold client confidentiality in use of social media and are also encouraged to
developsoundsocialmediapoliciesfortheir employees.
The rules can be customized for each profession or institution as they are a good
guide on usage of social media. However the rules seem to be limited as they serve
as guidelines and not clear cut legislation. For example the rules do not criminalize
any mis-use of social media. Not many countries have social media regulation
however in the instance that there is a specific regulation then it becomes easier to
enforcethan general benchmarks.
These rules are subject to the Constitutional provisions on the freedom of speech
and opinion. It becomes difficult to entirely control how a professional uses his
social media account due to this freedom which supersedes any other
regulation. In some instances an advocate may give an open and honest critique
which though may be harsh, is his opinion which is protected by the
Constitution.
There is a challenge of regulating or policing the cyber world. There are no
geographical boundaries in the cyber world and there is a lot of use of aliases. In
my view, these guidelines may be difficult to enforce unless they contravene a
specific legislation for example communication laws, defamation and hate
speech. This is because they serve as guidelines on best standards. However the
guidelines would be very effective if the recommended standards are adhered
to. The same principles can be replicated in other institutions and professional
associations.
LAWYERS LIMITED IN USE OF SOCIAL MEDIA

4. Many wealthy families or individuals usually
plan their estates to ensure that upon their death
or incapacitation, then their estate will be
preserved from succession disputes from varying
interests. Estate planning is a tool that enables a
person control the disposition of assets even after
their death. A good estate plan seeks to minimize
tax and other liabilities and pressures on the
estate. Contrary to common myth, estate planning
should not only be a preserve for the extremely
wealthy but should also be done by every person
who has assets and dependents. In larger and
more complex estates, estate planning involves many professionals including
lawyers and tax professionals. There are several estate planning tools including
wills and family trusts. There are many dangers in not planning your estate and the
most obvious is the succession wrangles that come in with an intestate succession.
An intestate estate, that is one where the owner had not made provisions for
dispositions of assets, is subject to lengthy court processes. The likelihood of such
an estate being squandered is high. A second risk, is the likelihood of some of the
assets being left out of the estate, as the beneficiaries are not privy to know all the
owner'sassetsforexamplebank accountsandsharesheld.
Recently billionaire businessman Njenga Karume passed on, however he planned
his estate in a manner that can be emulated by many. First of all he had written a
will where he appointed executors and made dispositions of several assets to many
people. According to media reports, he transferred some of his properties to
beneficiaries before his death. This is prudent step as ownership is changed when
the owner is still alive and can therefore guide the beneficiary on sound
management of the asset. It gives ample time for the successor to acquaint
themselves with management of the asset for example a business. However, the tax
implication of such a transfer is high as the tax will be charged as if it were a normal
transfer. In the event of a transfer upon death, the tax payable is very nominal.
Thereforeit isimportanttoconsiderthe tax liability ofsuchatransfer.
Media reports state that the executors of Njenga Karume's estate formed a trust to
manage the remaining assets on behalf of the dependents. This is also a prudent
move as it ensures that the estate is professionally run. It also minimizes the
incidences of squabbles over the estate by the beneficiaries as the trustees are
impartial. It is however important to set out the roles of the trustees clearly to avoid
action by the beneficiaries. The trustees should also be well selected and if possible
trained beforehand on management of the trust to avoid action by beneficiaries.
Some of the dependents of the estate have taken the trustees to court over alleged
mismanagement.
It is said that Njenga Karume also formed a foundation to manage the estate for the
heirs and also appointed a board to manage one of his larger companies. It is said he
also employed professionals to run his businesses. This is also a good strategy to
ensure that businesses that form part of the estate continue to be run professionally
and maintains continuity of the same. The downside would be that the dependents
would not have a chance to run the business and this could defeat the purpose of
maintaining alegacy.
Media reports indicate that the succession of the estate has been smooth and
without manysquabbles.Thiscouldbe attributed toproperestate planning.
MANAGING YOUR ESTATE THE CASE
OF NJENGA KARUME'S ESTATE

5. BEFORE YOU TIE THE KNOT...PROPERTY
PRENUPS RECOGNISED IN KENYA
Matrimonial property has been one of the main
contentions for separating couples second to
issues of child custody. Issues to do with
matrimonial property have taken the center stage
in high profile divorce cases. Now unlike before
the Matrimonial Property Act was passed, it is
possible for couples to employ certain strategies
to ensure that in the event of a separation
matrimonial property issues do not become very
complicated.
Matrimonial property has been defined in the Matrimonial Property Act and
includes matrimonial homes, household goods and any property acquired during
the marriage. This definition is very wide and in my view it includes all property
that is acquired by the couple when they are married. There are certain exceptions
to the definition of matrimonial property including property held in trust for
others. However looking at the definition of matrimonial property then intangible
property like shares and even intellectual property would fall here. There is
therefore great need to plan for your matrimonial property to ensure it does not
form a contentious issue as the couple goes into marriage. Take the example where
one spouse invents something during their marriage and is awarded a patent
which when commercialized is worth billions of shillings. During divorce or
separation proceedings would the other spouse be entitled to a share of this? In
most parts of the USA intellectual property has been considered to form part of
matrimonial property such that a singer's royalties can form part of matrimonial
property. The definition of what matrimonial property is, is important because in
the event of a divorce, this property will be subject to division/splitting as the court
decides.
Before the enactment of the Matrimonial Property Act in 2013, pre-nups were not
commonin Kenya. Evenafter the enactment ofthis Act,pre-nupsare rare in Kenya.
Most people do not know that the law recognizes pre-nups now. Section 6 of the
Matrimonial Property Act allows couples to enter into written arrangements
concerning matrimonial property before they enter marriage. The pre-nup will
take precedence over other principles of settling matrimonial property, in the
event ofadivorceorseparation.
Pre-nups are advantageous for several reasons. One is that they provide a
mechanism for couples to protect their separate property. Some property is
acquired without any assistance of the other spouse for example intellectual
property and therefore one party may desire for it to fall outside the definition of
matrimonial property and not be subject to divorce proceedings. Pre-nups protect
third parties who have an interest in the matrimonial property from the drastic
effects of divorce. For example a company's management would be badly affected
in the event that its shares fell subject to a matrimonial property dispute. This
happened in a leading divorce case in Kenya where the company's shares became
part of divorce proceedings. The company performance went down and other
third parties were affected by the long divorce proceedings. Pre-nups can hedge
this risk. Pre-nups preserve the value of property and also forms a hedge against
property devaluation in the event of divorce proceedings. Pre-nups ensure the
divorce proceedings are faster and neater. There is opportunity for less conict as
there is little likelihood for any of the spouses to use matrimonial property as a
revenge weaponagainst the other.
Pre-nups are advisable before entering into marriage if there is a sense of risk in the
marriage, or where there is need to protect important assets in the event of a
divorce. However pre-nups have also been known to bring about a lot of tension in
a marriageandthey seemtoimplythat the couplehastrust issueswith eachother.

6. OUT WITH THE QUACKS: PSYCHOLOGISTS
AND COUNSELLORS NOW REGULATED
A few years ago there was a story of a fatal life
coaching session in the USA. A participant in a life
coach session died of severe injuries caused by
following the advice of the “motivational speaker”
to push his body to the limits. We keep hearing of
cases where so called motivational speakers, life
coaches, counselors and therapists make their
clients worse rather than better by giving bad
advice. Unfortunately there has not been much
redress against bad professional advice given in
these sessions, except for recovery of damages
under the tort of law. Even then, it traditionally
remained hard to build up a case against such malpractice because the standard of
proof required to file such a case is high. Most of the times the so called
professionals made their clients sign indemnity forms that the clients would
indemnifythe practitionersfromany lossesarisingfromthe sessions.
The step to regulate counselors and psychologists through the Counselors and
Psychologists Act is very timely given the past practice where anyone was able to
hold themselves out as a counselor or psychologist without any regulatory
approval. The step to enact this law, upholds consumer rights especially for those
who use these services. Prior to this law, there was no regulation on counseling and
this therefore endangered the consumers and the public as they were susceptible to
quack advice. Services provided by quack counselors can end up being very
damagingtothe consumer.
The Consumers and Psychologists Act states that all psychologists and counselors
must be registered under the Ministry of Health through the Counselors and
Psychologists Board; which is the board charged with regulating the industry. The
same Act also provides for a Counselors and Psychologists Society to which every
person who qualifies to be a counselor/psychologist must be registered. This
society is the equivalent of the professional body in the industry. This society is
expected to set up industry benchmarks and also protect the public from any losses
arising out of the profession. Standards of the profession are issued by a Council
establishedunderthe Act.
The Act also sets out eligibility criteria for counselors and psychologists. They must
have a degree in either counseling or psychology and they must also pass the board
exams. The person must also be morally fit and proper to hold a license as a
psychologist/counselor. This regulation therefore means that quacks will be
weeded out of the industry and only qualified persons can practice as such. It is an
offence for a person who is not qualified to hold himself out as a
counselor/psychologist.Theoffenceispunishableby fining andimprisonment.
Colleges that purport to offer counseling or psychology courses must be registered
under this law. The colleges must meet the eligibility requirements before they can
offer any courses on the same. It is an offence for any learning institution to offer
counselingorpsychologycourseswithout having been registeredunderthe Act.
For persons already in private practice, the Act allows you to continue with your
practice without having taking a license however this is only for one year after the
commencementofthisAct.Thelawrequiresyoutoapply fora licensethereafter.
This law is welcome as it protects the public from quacks. It also provides industry
benchmarks therefore improving the quality of services for the consumer. It
encourages competition in the industry and limits the number of participants to
onlythosewhoqualify.

7. IS THE SECURITY BILL,
2014 THAT CONTROVERSIAL….OUR VIEW
The newly assented to Security law has generated
a lot of outcry from various quarters such that
some people who took a dissenting view could not
wait for the festivities to be completed but sought
to seek redress in court just two days to Christmas.
The application for conservatory orders was not
granted in the first instance and this means that
Kenya nowhasanewsecuritylaw.
The new security law is basically an amendment of
already existing security laws to either input
stricter penalties for various offences or altogether
criminalize certain actions which were previously not criminal. The Public Order
Act and the Penal Code have been greatly amended by this new law. The big
questionbegs then, what isthe controversysurroundingthislaw?
Firstly the fact that it imposes stricter penalties for already existing offences does not
go well with very many persons. The reason there is a penal law, and that is a law
that stipulates punishment of offences is to deter persons from committing various
offences. The court has jurisdiction to award anything from the minimum to the
maximum sentence and the judicial officer takes many things into account when
giving a sentence for example where the offender is a first time criminal and so on. In
my view, the penalties imposed by the laws are reasonable for there indeed is a need
to deter criminals from committing certain offences. Recently Kenya took global
stage due to increased incidences of women being forcibly stripped. A law that
imposes a strict penalty for perpetrators of such crimes would serve as a deterrent.
A light sentence would encourage repeated offences but strict penalties discourage
securityoffences.
The main cause for outcry though has been an amendment to the Penal Code
through the new security laws, by making it an offence to publish, broadcast,
distribute through print or electronic means images of dead or injured persons and
which is likely to cause alarm. Definitely this will impact a lot of persons. The media
will be affected by this amendment and so will ordinary persons. This law makes it
an offence to circulate e-mails or even use social media that contain the offensive
material.Thereforethisisanewlawthat willalsoimpactsocialmedia.
There are various laws that provide on usage of social media indirectly and
therefore users of social media should take into account what kinds of posts they
make. The law does not limit the offence to terrorist's activities only but is wide. The
law considers the intent of the publisher or broadcaster for it clearly states that
anyone who committees the offence with bad intention has committed an offence. Is
this provision reasonable? I have no problem with it, for there was an urgent need to
limitcirculationofsuchimagesthrough the socialmedia.
I am at least happy that next time somebody sends me graphic videos of beheadings
and causes me sleepless nights, there is a redress for me. There was also an urgent
need for responsible use of social media. The Constitution meanwhile provides for
freedom of speech, information and so on. However there is a need to limit these
rights with respecting others (the dead, injured) and also keeping in mind security.
Nobody would be pleased to see a picture of themselves injured, doing rounds on
socialmedia.Forme,Iactually welcomethislaw.

8. Women should celebrate that it is now a specific crime for anyone to strip them
naked with a view of undermining their morality. The sentence is ten years for
anyonewhodoesthat. Iknowmanypeoplewelcomethisprovision.
Another welcome provision is that it is now criminal for public officers to aid
crime, facilitate irregular entry into the country, hide criminals or issue fake
paapers to criminals. It's also a crime for anyone to jeopardize security operations.
I personally think Kenya has attained a great milestone in legislating security.
Nowimplementationiswhat isneeded.

9. CHANGES IN KENYA'S FINANCIAL
ENVIRONMENT IN 2015
The Finance Bill 2014 came into force on January
st
1 2015 and it is going to change the financial
environment in which businesses operate. The
Finance Bill was assented in August 2014 and
comes into effect this year. It is therefore
important to know some of the changes that are
likely toaffectyouoryourbusinessthisyear.
The main change in the financial environment is
on taxation. The Finance Act has provided
several amendments to the Income Tax Act and
therefore has drastically changed the tax
environment in Kenya. While not everyone may be affected by the changes in the
taxation laws, a number of businesses or individuals will be affected by these
changes. The Act has re-introduced the capital gains tax which had been scrapped
in 1985 to attract foreign investors. Back then the capital gains tax was payable on
any transfers on real estate and stocks. The tax was scrapped and what we had
instead was a stamp duty of around 4% of the value of the property. Capital gains
tax is now payable at 5% on the net gains of transferring a property that means
selling price less purchase price. All property is subject to capital gains tax
including real estate property, intellectual property and shares or stocks. Capital
gains is a tax that is payable where the property is situate in Kenya despite the
countryofjurisdictionwherea personorbusinessresides.
Capital gains tax is a complicated tax that will take time for businesses to
understand and it will likely complicate transactions. Previously when
transferring property, all one had to do is get a government valuer to value the
property and the purchaser would pay 4% of whatever value was yielded by the
valuation. The new tax is likely to be too high in some cases, for example where the
property was acquired years ago and has appreciated. It is also likely to favour
properties which have been recently acquired or have not appreciated. Questions
as to evidence of purchase price remain; in as much as land records indicate the
purchasepricethrough the transferdocument.
Capital gains tax is applicable to all property held in Kenya which means that cross
border transactions will be affected. For example, mergers & acquisitions,
acquisition of property or intellectual property in Kenya shall be affected whether
or not the acquiring entity is local or foreign. Analysts argue that the tax may
discourage foreign investment into the country. The definition of immoveable
property has been widened to include mining and petroleum rights, therefore the
oil, gas and mining industry shall be affected by the tax. There is a whole schedule
in the Finance Act on taxation of this sector. This comes at a time when the country
is making oil discoveries and where the mining laws are set to change soon.
Therefore investors in this sector should now acquaint themselves of the new laws
ontaxation ifthissector.
A few amendments have been made as to what may be tax deductible and this
includes expenditure on vacations paid for by employers till July 2015. Therefore it
may be prudent for businesses which regularly pay for vacations for their staff to
take advantage of the tax incentive offered until July 2015. The business can pass a
st
policy that all staff vacations that are to be paid for should be taken before July 1
2015.

10. The definition of some terms in the Competition Act has been made wider
therefore market leaders in each sector are bound to be affected by such
amendmentsascontainedinthe FinanceAct.
The changes in the Finance Act are going to change the business environment in
2015. It has been argued that the introduction of the capital gains tax will benefit
the whole economy as through this tax the government will be able to meet
revenue needs. The real estate sector is booming and there is a lot of potential in
the sector in terms of budgetary needs. We wait to see how the regulators will
implementthe FinanceAct.
Havea prosperousNewYear.
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