PBO Act 2013: Everything You Need to Know About Public Benefit Organisations in Kenya

The Public Benefit Organisations PBO Act 2013 provides a robust legal framework for the operation of public benefit organizations in Kenya. It marks a significant shift in how non-governmental and nonprofit organizations are governed, ensuring transparency, accountability, and fostering the public good. Whether you’re part of a local, national, or international PBO, this Act is a must-know for navigating the complex landscape of nonprofit operations in Kenya.

In this blog, we’ll explore the key provisions of the PBO Act 2013, its impact on NGOs, the registration process, and the benefits of compliance.

What is a Public Benefit Organisation (PBO)?

The PBO Act 2013 defines a Public Benefit Organisation as a voluntary, independent, nonpartisan, and nonprofit organization dedicated to promoting the public good. These organizations may operate locally, nationally, or internationally and can either be membership-based or non-membership-based.

To be recognized as a PBO, the organization must engage in activities that benefit the public, as outlined in the Sixth Schedule of the Act. Some of these activities include poverty alleviation, environmental protection, health services, and education, among others.

Why Registration is Essential: Legal Recognition and Benefits

One of the cornerstone requirements of the PBO Act 2013 is registration. Organizations must register with the Public Benefits Organisations Regulatory Authority to be legally recognized as PBOs. While registration is not mandatory, it opens the door to a wealth of incentives that non-registered organizations cannot access.

Benefits of Registration:

1. Tax Exemptions: Registered PBOs are entitled to exemptions on income derived from grants, membership fees, donations, and other public-benefit-related revenue streams.
2. Government Support: Registered organizations gain access to government funding and other forms of assistance, which can significantly enhance their capacity to deliver public services.
3. Preferential Treatment in Public Procurement: The Act offers PBOs preference when bidding for government contracts related to public service.
4. Access to Educational and Training Materials: The Act encourages the growth of PBOs by providing opportunities for capacity-building and skill development through training resources.

Non-registered organizations, despite engaging in similar public-benefit activities, are excluded from claiming these benefits and cannot legally refer to themselves as PBOs under Kenyan law.

Impact on NGOs: Transition from the 1990 NGO Coordination Act

The PBO Act 2013 repeals the NGO Coordination Act of 1990, transforming how non-governmental organizations (NGOs) operate in Kenya. NGOs previously registered under the old system must now transition to the PBO framework to retain their legal status.

This transition involves reapplying for registration within one year of the enactment of the PBO Act. Failure to comply could result in NGOs losing their legal recognition and the associated benefits of PBO status.

This change brings new responsibilities, including more stringent governance requirements and accountability measures. It’s essential for organizations to remain compliant, as failure to do so can jeopardize their ability to operate effectively in Kenya.

Foreign PBOs (IPBOs): New Rules for International Organisation

For international public benefit organizations (IPBOs) looking to operate in Kenya, the PBO Act 2013 introduces specific governance requirements. Foreign PBOs must register with the Authority, and at least one-third of their directors must be Kenyan citizens. This mandate ensures that foreign PBOs maintain a connection to local communities and contribute to the public good in Kenya.

While certain permissions may be granted for short-term operations, any IPBO that intends to implement long-term programs in Kenya must go through the full registration process. This helps create a level playing field between local and foreign PBOs while ensuring foreign organizations align with Kenyan regulatory frameworks.

Tax Benefits for Registered PBOs

One of the most appealing aspects of the PBO Act 2013 is the range of tax exemptions available to registered organizations. These exemptions include:

• Grants, Contributions, and Membership Dues: Funds received through donations, grants, and membership fees are exempt from taxation, provided they are used for public-benefit purposes.
• Revenue from Public Interest Activities: Revenue generated from activities that align with the public interest, such as healthcare services or education programs, may also be exempt from taxation.

These tax benefits significantly reduce the financial burden on PBOs, allowing them to focus more resources on their core mission of serving the public.

Consequences for Non-Registered Entities

Organizations that do not register under the PBO Act 2013 cannot claim the legal protections or benefits that come with PBO status. This limitation extends to areas such as tax exemptions, government support, and public procurement preferences.

The Act ensures that only organizations that comply with the legal requirements are granted the privileges of PBO status. Non-compliant organizations risk losing their ability to operate as verified NGOs, significantly limiting their scope and effectiveness in delivering public services.

Conclusion: A Comprehensive Framework for PBOs in Kenya

The PBO Act 2013 represents a significant leap forward in the governance of public benefit organizations in Kenya. By providing a structured legal framework and offering numerous incentives, the Act encourages organizations to register and comply with its provisions.

For local NGOs, the transition from the previous NGO Coordination Act to the PBO Act introduces new governance structures but also opens doors to greater opportunities for funding, tax relief, and operational support. For international organizations, the new governance rules ensure that foreign entities contribute to Kenya’s public good while adhering to local regulations.

Whether you’re part of a local, national, or international organization, understanding the PBO Act 2013 is crucial for ensuring your organization thrives while making a positive impact on Kenyan society.

Call to Action:

Is your organization compliant with the PBO Act 2013? Ensure you are operating within Kenya’s legal framework for public benefit organizations and take advantage of the many benefits that come with registration. If you’re unsure about your organization’s status, it’s time to register and unlock new opportunities to serve the public good!

Written by Carl Maingi