Foreign investors setting up an agricultural operating business in Kenya, such as an avocado orchard, a flower farm or a dairy operation, almost always propose the same structure first: a Kenyan partner or vehicle holds the land, and a separate company the investor controls leases it and runs the farm. It is a reasonable instinct. It is also usually the exact transaction the Land Control Act was built to stop, and it is the central problem for any foreign-controlled company that wants to use Kenyan agricultural land.
We have covered the company-registration background for foreign-investor farm setups in our flower farm guide, and the export-licensing mechanics separately. This piece focuses on how to structure the relationship with the land once a straightforward lease to the operating company will not clear consent.
Why the Direct Lease Usually Fails
Article 65(1) of the Constitution of Kenya, 2010 allows a person who is not a citizen to hold land on leasehold tenure only, for no more than ninety-nine years. Article 65(3)(a) extends the restriction to companies: a body corporate is a citizen only if it is wholly owned by one or more citizens. A foreign investor holding even one share in the operating company is therefore enough to make that company a non-citizen for this purpose.
For agricultural land, the Land Control Act (Cap 302) adds a second obstacle. Under section 6(1), a sale, transfer, lease, mortgage or other dealing with agricultural land in a land control area is void for all purposes unless the land control board has consented. Section 9(1)(c) then directs the board to refuse consent where the land or share is to be disposed of by sale, transfer, lease, exchange or partition to someone who is not a Kenyan citizen, a private company or co-operative society all of whose members are citizens, group representatives, or a state corporation. The Cabinet Secretary applies the Act to areas by Gazette notice under section 3, so check whether the land in question falls within one.
The board is not being unhelpful when it refuses the lease; it is applying the statute as drafted. Section 24 allows the President to exempt land, transactions or persons from the Act by Gazette notice, but that power is discretionary and not something to build a farming timeline around.
How Land Control Board Consent Works
The board applies a fuller test than the citizenship bar. Under section 9(1)(a) and (b), it must have regard to the effect of its decision on the economic development of the land and on standards of good husbandry, and act on the principle that consent should generally be refused where the transferee is unlikely to farm or develop the land well or use it profitably, or already has sufficient agricultural land. Section 9(1)(c) is different: it is not a matter of the board’s judgment.
An application for consent must be made within six months of the agreement (section 8(1)), unless the High Court extends the period. If the board refuses, the applicant has thirty days to appeal to the provincial land control appeals board (section 11), and then thirty days to appeal to the central board (section 13). Neither appeal changes the citizenship bar, so an appeal against a section 9(1)(c) refusal is unlikely to succeed.
What to Do Instead
The fix is not to find a cleverer way to give the operating company an interest in the land. It is to structure the operating company’s return contractually and keep any interest in the land with the Kenyan party.
Keep land ownership with the Kenyan party. A supply agreement, a profit share or a farm-management contract can give the investor’s company its commercial return without a lease. Be careful, though: section 6(1)(a) catches any “other disposal of or dealing with” agricultural land, so whether a given contract is a controlled transaction depends on its terms. A contract that gives the operating company exclusive possession or a registrable interest in the land risks being treated as a dealing, and a structure designed to disguise a non-citizen’s interest risks being void, so each draft needs to be tested against section 6 before signing.
Protect the capital investment through separate security. Trees, irrigation systems and farm infrastructure are recoverable assets whether or not the company holds an interest in the ground. The Movable Property Security Rights Act, 2017 defines “tangible asset” to include crops and machinery, and establishes a Registry under section 19 for security rights. Combined with step-in rights, compensation-on-termination clauses and clear contractual title to anything removable, this does protective work that a lease would otherwise have done.
Treat it as a governance relationship. The structure depends on an ongoing relationship with whoever holds title, so the contract must say what happens if the relationship sours, and on the landholder’s death. Under section 6(3)(a), transmission on death under a will or intestacy is outside the section unless it causes the land to be divided into separately titled parcels, but the operating company’s contract still needs to bind the landholder’s estate and successors in title expressly.
Plan the next capital raise. Section 6(1)(c) applies to shares in a private company or co-operative society that owns agricultural land in a land control area. If the land is never inside the operating company’s asset register, share transfers to future investors should not trigger Land Control Board involvement for that reason.
A Worked Example
Consider a foreign investor developing a modest horticultural pilot on a few hectares, with a local partner who owns the land. The partner keeps title throughout. The operating company enters a farm-management and produce off-take agreement with the partner, registers a security right over the standing crop and irrigation equipment, and the parties sign a separate agreement on what happens on the partner’s death, incapacity or a breakdown in the relationship. If outside investors join later, they buy shares in a company that has never held an interest in the land.
What This Does Not Solve
This approach trades registered security in the land for contractual and movable-asset security. That is a genuine trade-off, not a loophole, and it should be sized to the investment. Whether it is acceptable for a specific project needs advice on the actual contracts and the land’s status.
How We Can Help
Clay & Associates Advocates advises foreign investors and their Kenyan partners on structuring agricultural and other land-based ventures, from the initial Land Control Board assessment through to the operating company’s incorporation and governance documents. Contact our Real Estate or Corporate & Commercial practice to discuss a specific site or structure.
Sources: Constitution of Kenya, 2010, Article 65; Land Control Act (Cap 302), sections 3, 6, 8, 9, 11, 13 and 24; Movable Property Security Rights Act, 2017, sections 2 and 19.
Frequently asked questions
Can a foreign investor ever hold a lease over Kenyan agricultural land directly?
Only up to ninety-nine years under Article 65, and only if the land control board consents, which section 9(1)(c) of the Land Control Act directs it to refuse where the lessee is not a citizen or a wholly citizen-owned private company. In practice a direct lease to a foreign-controlled entity is very difficult to obtain.
Does the section 24 presidential exemption offer a reliable alternative?
No. It is a discretionary power exercised by Gazette notice, with no guaranteed timeline, and should not be a planning assumption.
What happens to the arrangement if the Kenyan landholding partner dies?
Transmission on death is outside section 6 unless it causes the land to be divided into separately titled parcels, so the land can pass to heirs without board consent. The operating company’s contract should bind the estate and successors in title expressly.
