Registered Venture Capital Company: CMA Approval Requirements

Registered venture capital company CMA approval Kenya

Registered venture capital companies are, like credit rating agencies, an approval category under section 23(2) of the Capital Markets Act rather than a licence category. Registration under the Capital Markets (Registered Venture Capital Companies) Regulations, 2007 gives a venture capital vehicle recognised status with the Capital Markets Authority (CMA), which matters for tax treatment, fundraising credibility, and access to institutional investors who require CMA-registered structures.

Documentation Requirements

An application under regulation 4(1) of the 2007 Regulations must be made on the prescribed Form 1 and accompanied by a certified certificate of incorporation or compliance, certified memorandum and articles of association with objects permitting the venture capital business, and a certified board resolution approving the application. The applicant must also submit a detailed investment policy for each fund it will operate, covering investment objectives, minimum and maximum investment amounts per enterprise, investment rules and process including minimum commitment and investment periods and drawdown procedures, exposure limits, preferred divestiture strategy, a diversification strategy, fee and charge policies, and the risk profile of the sectors targeted.

The Fund Manager Dependency

A registered venture capital company cannot operate without a CMA-licensed fund manager already in place. The application must include the fund manager’s letter of acceptance of appointment, in the form set out in the Fourth Schedule to the Regulations, along with the management agreement between the company and the fund manager containing the particulars required under regulation 10. This mirrors the structure seen in the online forex money manager category, where the licence is conditional on an existing relationship with another CMA-regulated entity. A venture capital company applying without a fund manager already lined up and licensed is not in a position to complete the application. Promoters exploring this structure for the first time sometimes underestimate how much of the registration timeline is really the fund manager licensing timeline in disguise, since the venture capital company cannot move faster than its appointed manager’s own regulatory status allows.

Capital Requirements

The applicant must submit three years of audited accounts (where relevant) plus six months of unaudited accounts, and must demonstrate paid-up share capital of Kshs. 100,000,000 and a minimum fund size of Kshs. 100,000,000. This is a materially higher capital bar than any of the CMA’s online forex trading categories, reflecting the scale of institutional capital a registered venture capital company is expected to deploy.

Track Record Requirement

The applicant must demonstrate previous involvement in venture capital business for at least three years, or, failing that, provide evidence that one or more of its directors has a demonstrable track record managing venture capital funds for at least three years. This gives a newly incorporated vehicle a viable path to registration provided its leadership carries the relevant experience, rather than requiring the corporate entity itself to have an operating history.

Governance and Personnel

At least one third of the directors must be independent, a lighter governance threshold than the board composition rules applied to forex brokers and money managers, which require a minimum of three directors with a third natural persons and a third independent and non-executive. The application must disclose details of the company auditor and company secretary, including the secretary’s ICPSK registration number, and must include comprehensive CVs, Fit and Proper forms, and certificates of good conduct for directors and key personnel, consistent with the standard applied across CMA-regulated categories. One letter of bank reference and two letters of business reference, drawn from companies the applicant has previously invested in, are also required where applicable, describing the nature and duration of the investment and the contribution the applicant made to the referee’s business.

Why the Fund Manager Dependency Matters in Practice

Sequencing matters here more than in most CMA applications. A promoter cannot submit a complete registration application without a fund manager already licensed and formally appointed, which means the fund manager appointment process needs to run ahead of, or at minimum alongside, the venture capital company registration itself. Promoters sometimes assume they can register the vehicle first and sort out the fund manager relationship afterward; the Regulations do not permit this. The management agreement between the two must also address the specific particulars required under regulation 10, so a generic investment management agreement drafted without reference to the Regulations is unlikely to satisfy the CMA on first submission.

The capital and fund-size thresholds also deserve early attention from a fundraising perspective. Kshs. 100,000,000 in paid-up capital and a Kshs. 100,000,000 minimum fund size are both institutional-scale figures, which in practice means a venture capital company registration is rarely the right vehicle for an early-stage angel syndicate or a first-time fund manager without committed institutional capital already lined up.

The Application Form Itself

Form 1 under the 2007 Regulations goes further than most CMA application forms in the personal disclosure it demands of shareholders, directors, and the company secretary: prior receivership or bankruptcy, any denial or withdrawal of a licence or approval to carry out financial sector business in any jurisdiction, any disciplinary action or public criticism by a regulator or professional body, involvement in any violation of investor protection law, criminal convictions, and any current investigation or proceeding that could result in a “yes” answer to those questions. Each shareholder, director, and the secretary answers these individually, not as a single company-level declaration.

Ongoing Obligations and Fees

Once registered, the company must pay a prescribed approval fee in respect of itself and each fund it operates, and each fund must pay a prescribed annual fee thereafter, though no annual fee is payable in the year of registration. The Regulations do not state the exact fee figures in the sections publicly available; these should be confirmed directly against the current Schedule to the Regulations, or with the CMA, before being quoted to a client. The company also cannot change its shareholders, directors, or fund manager without first obtaining the CMA’s written no-objection.

How This Fits the Wider CMA Framework

Registered venture capital companies sit within the same section 23(2) approval regime as credit rating agencies, collective investment schemes, central depositories, and securities exchanges. For a broader view of CMA licensing and approval categories, see our overview of Capital Markets Authority licensing in Kenya, and for the fund-formation angle more generally, our guide on the financial services industry practice.

How We Can Help

Clay & Associates Advocates advises on structuring registered venture capital company applications, including the fund manager appointment and management agreement, investment policy drafting, and the personal disclosure obligations for shareholders and directors. We also advise on the sequencing question specifically, since getting the fund manager relationship in place before the registration application is submitted is usually the difference between a smooth review and a stalled one, and on structuring the investment policy so that it is specific enough to satisfy the CMA without locking the fund into terms that limit its commercial flexibility once operational. Getting this balance right at drafting stage is usually cheaper than renegotiating the policy with the CMA later in the review. Contact our regulatory and compliance team to discuss a registration application.

Sources: Capital Markets Act, section 23(2); Capital Markets (Registered Venture Capital Companies) Regulations, 2007; Capital Markets Authority, Registered Venture Capital Company compliance checklist.