CHAPTER 521 - Unit Trusts (Repealed) Act
(Repealed by No 3 of 2000)
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LAWS OF KENYA
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THE UNIT TRUSTS ACT
CAP. 521
Published by the National Council for Law Reporting
with the Authority of the Attorney-General
CHAPTER 521
THE UNIT TRUSTS ACT
Commencement Date: 1965-11-30
An Act of Parliament to provide for regulating the operations of unit trusts
Short title.
1. This Act may be cited as the Unit Trusts Act.
Interpretation.
2. In this Act, unless the context otherwise requires -
"Authority" means the Capital Markets Authority established under the Capital Markets Authority Act;
"bank" means a bank licensed as such under the Banking Act;
"company" means a company within the meaning of the Companies Act, or a company incorporated outside Kenya but registered in Kenya under the Companies Act;
"interest in a unit trust" means a beneficial interest in the money, investments and other property that are subject to the trusts governing that unit trust;
"manager", in relation to a unit trust, means the company (howsoever it is described) in which, under the trust deed, are vested the powers and functions of the manager of a unit trust under this Act;
"Minister" means the Minister for the time being responsible for finance;
"Registrar" means the Registrar of Unit Trusts appointed by section 20 (2) or the Deputy Registrar of Unit Trusts so appointed;
"trust" means a trust within the meaning of the Trustee Act;
"trust deed", in relation to a unit trust, means the trust deed that sets out the trusts governing the unit trust, and includes every instrument that varies those trusts, or affects the powers, duties, or functions of the trustee or manager of the unit trust;
"trustee", in relation to a unit trust, means the trustee in which are invested the money, investments and other property that are for the time being subject to the trusts governing the unit trust;
"unit holder", in relation to a unit trust, means any person (other than the manager) who is the lawful holder of a certificate evidencing that he has an interest in the unit trust, and includes a purchaser of or a subscriber for such an interest who is entitled to have a certificate issued to him in accordance with section 11;
"unit trust" means any scheme or arrangement in the nature of a trust in pursuance whereof members of the public are invited or permitted, as beneficiaries under the trust, to acquire an interest or undivided share (whether called a subunit or by any other name) in one or more groups or blocks of specified securities and to participate proportionately in the income or profits derived therefrom.
Unit Trust to Have Manager and Trustee.
3. (1) There shall be a manager and a trustee of every unit trust.
(2) Subject to this Act, a company that is the manager of any unit trust -
(a) shall have vested in it the powers of management of the investments and other property that are subject to the trusts governing that unit trust; and
(b) shall have the function (whether as principal or by an agent) of issuing or offering interests in the unit trust to the public for subscription or purchase, or
of inviting the public to subscribe for or purchase such interests, or both of those functions.
(3) Subject to this Act, the trustee of a unit trust shall have vested in it the investments and other property that are for the time being subject to the trusts governing the unit trust.
(4) No trust corporation or company or bank shall act as trustee of a unit trust, and no company shall act as manager of a unit trust if the manager or proposed manager and the trust corporation or company or bank acting or proposed as
trustee are deemed by the Authority to be under the control of substantially the same persons or to consist of substantially the same shareholders.
Restrictions as to Manager
4. (1) Every manager of a unit trust shall be a company, approved for the purposes of this Act by the Authority.
(2) No company shall act as manager of a unit trust unless a person approved by the Authority has given a bond to the Government in such sum as may be prescribed in regulations made by the Minister under this Act.
(3) The sum named in a bond given under this section shall not be deemed to be a penalty, but shall be deemed to be liquidated damages, and shall accordingly be recoverable in full as a debt due by the surety to the Government unless the surety proves performance of every condition upon which the bond is defeasible.
(4) Every sum so recovered shall be paid into the Consolidated Fund, and after the deduction of costs and other expenses of the Government, the residue shall, without further appropriation than this section be paid to the trustee and applied by it towards the discharge of the obligations of the manager, and any balance not required for that purpose shall be refunded to the surety.
Restrictions as to Trustee
5. (1) Every trustee of a unit trust shall be -
(a) a trust corporation within the meaning of the Trustee Act; or
(b) a company or bank approved for that purpose by the Authority either generally or in respect of a particular unit trust.
(2) The Minister may make regulations not inconsistent with the provisions of this Act providing for the appointment, removal or retirement of trustees.
Unit Trust Not to Operate Until Registered.
6. (1) No manager of a unit trust, and no person as agent of such manager, shall issue or offer to the public for subscription or purchase any interest in a unit trust, or invite the public to subscribe for or purchase such an interest, and no interest in any unit trust shall be created, unless and until -
(a) the unit trust has been registered by the Registrar in accordance with this Act and any regulations made thereunder and the Registrar has issued a certificate in respect thereof and such registration or certificate has not been cancelled; and
(b) a trust deed relating to such unit trust has been registered by the Registrar in accordance with this Act and any regulations made thereunder and such registration has not been cancelled; and
(c) the unit trust has been licensed as required under this Act and such licence is valid at that time.
(2) The Registrar shall not register any unit trust unless it complies with this Act or any regulations made thereunder.
Licensing of Unit Trusts
6A. (1) Notwithstanding any other provisions of this Act, where a unit trust is registered under section 6 an application by the manager of unit trust for a licence to carry on business as a unit trust shall be made to the Minister, through the Authority, on such form as may be prescribed together with payment or licence fee as specified in subsection (2).
(2) The Minister may, subject to such conditions as he may consider necessary and on payment of a licence fee of two thousand shillings, issue a licence to a unit trust in such form as the Minister may approve for a period of one year, or such longer period as the Minister may approve.
(3) In considering the application for a licence under the section title Minister may require to be satisfied as to the financial condition of the manager or trustees of a unit trust, the qualifications of the manager of the unit trust in the area of investment management, the integrity of the trustee and manager, and that the objects of this Act and the public interest will be served,
(4) A licence issued under subsection (2) shall be in force until the date specified in the licence, but it may be renewed on payment of a further licence fee.
(5) The Minister may at any time endorse any conditions on a licence or vary the licence if in his opinion it is expedient to do so.
Copy of Deed to Be Lodged with Registrar
7. (1) Notwithstanding anything to the contrary in section 119 of the Companies Act, the manager of each unit trust shall lodge the trust deed in respect thereof or an authenticated copy thereof and every amendment of that deed or an authenticated copy thereof with the Registrar, who shall, if he is satisfied that it complies with this Act and any regulations made thereunder, register the same.
(2) Every authenticated copy of a trust deed or any amendment thereto shall be authenticated by a director or responsible officer of the company that is trustee of the unit trust.
(3) Where any amendment of the trust deed in respect of any unit trust or an authenticated copy thereof has to be lodged with the Registrar as aforesaid, it shall be so lodged within such period as may be prescribed.
Revocation of Licence, Etc
8. (1) Where the Minister, in consultation with the Authority, considers that the licence of any unit trust ought to be revoked on the grounds that the conditions upon which it was licensed are no longer fulfilled, or circumstances relevant to such licensing have materially changed since such licensing, the Minister, or a person authorized by him in writing, may serve on the manager or trustee of unit trust concerned a notice that revocation of the licence is being considered, specifying the reasons for such proposed revocation and inviting the manager or trustee, within thirty days from the date of service of such notice to make such representations as they consider necessary.
(2) After the expiry of the period of thirty days specified in subsection (1) and having taken into consideration such representations as may be made by the manager or trustee of the unit trust concerned, the Minister may revoke the licence of such unit trust and such decision by the Minister shall be final.
(3) On the registration of any unit trust, the licence of which has been revoked shall forthwith have its registration cancelled by the Authority.
Trustee to Keep Accounts.
9. (1) Every trustee of a unit trust shall cause proper books of account to be kept, either by the trustee or the manager, in respect of the unit trust, and shall make available annually in such manner as may be prescribed by the Minister an audited statement of accounts in respect of the unit trust, together with a summary of any amendments of the trust deed that have been made since the date of the last statement.
(2) For the purposes of this section, "audited" means audited by an auditor or firm of auditors qualified in accordance with the requirements of section 161 of the Companies Act and approved by the Authority.
Invitation to Subscribe.
10. Before any interest in a unit trust is issued or offered for public subscription or purchase, or the public are invited to subscribe for purchase of such interest, the manager or trustee, shall have registered the trust with the Authority and obtained a licence, and issued a statement in writing, in such a manner, and containing such matters as may be prescribed.
Certificate of interest to be issued.
11. (1) Upon the purchase of an interest in any unit trust from the manager, or upon a subscription for an interest in the unit trust, the manager of the unit trust shall as soon as practicable issue or cause to be issued to the purchaser or subscriber a certificate as evidence of that interest, which certificate shall be given by the trustee of the unit trust or by someone other than the manager authorized in writing by that trustee.
(2) On any such certificate, a facsimile of the signature of any person, by whatever process it is produced, shall be deemed to be the signature of that person.
Obligation to buy back interests.
12. (1) The manager shall be obliged to buy back interests in the unit trust if requested to do so by the holder of such interests.
(2) The trust deed shall state the manner in which and the conditions on which such interests are to be bought back and resold to the public, including the method of calculating the minimum price at which interests are to be bought back.
Interests in Unit Trust to Be Transferable.
13. (1) Every interest in a unit trust shall be transferable.
(2) The trust deed in respect of a unit trust shall state the manner in which transfers of interests in the unit trust shall be made and recorded.
Meeting of Unit Holders
14. A meeting of the unit holders of any unit trust shall be held at the request of the manager or the trustee, or of such number of unit holders, or of unit holders holding such number of units as may be prescribed, and the manner of convening such meeting and the practice and procedure, and any other matters relating to such meeting, shall be in accordance with the provisions of regulations made by the Minister for such purpose.
Removal of Manager.
15. (1) The High Court may, on the application of the trustee of a unit trust, or any unit holder, or of the Authority, and on being satisfied that it is in the interests of the unit holders as a whole, order that the manager be removed from that office.
(2) If the High Court orders the removal of the manager of any unit trust, that manager shall immediately desist from all activities related to the unit trust.
Appointment of Inspectors.
16. (1) One or more inspectors to investigate and report on the administration of any unit trust may be appointed by -
(a) the Authority where it has reasonable cause to believe that the Provisions of this Act are not being complied with or that full disclosure is not being made to him or that it is in the interests of unit holders or the public so to do; or
(b) the High Court on application made by a unit holder or unit holders holding at the date of the application not less than one-tenth of the value of the interests in the unit trust then held by unit holders.
(2) Every inspector appointed under subsection (1) shall have in relation to the unit trust and its administration all the powers conferred on an inspector in relation to a company and its affairs by section 168 of the Companies Act, save that refusal under subsection (3) of that section shall constitute an offence under this Act, and the provisions of section 168, so far as they are applicable and with any necessary modifications, shall apply accordingly.
(3) The report of every inspector who as appointed by the Authority shall be made to the Authority and the report of every inspector who is appointed by the High Court shall be made to that Court and the Authority or the Court, as the case may be, may make such provision as it thinks fit in relation to the expenses of the investigation.
(4) No officer or agent of a company that is manager of a unit trust shall be excused from answering any question put to him by an inspector with respect to the affairs of that company in relation to such unit trust on the ground that the answer may incriminate or tend to incriminate him, but no statement made by him in answer to any such question shall be admissible against him in criminal proceedings, except proceedings under the Penal Code for making a false statement upon oath.
(5) If any officer or agent of a company that is manager of a unit trust in respect of which an inspector has been appointed under this section refuses to produce to the inspector any book or paper which it is his duty under this section so to produce, or refuses to answer any question which is put to him by the inspector with respect to the affairs of the company in relation to the unit trust, that officer or agent shall be guilty of an offence and liable to imprisonment for a term not exceeding two months or to a fine not exceeding twenty thousand shillings or to both.
Inspection by the Authority.
13 of 1990 S.13.
16A. (1) Notwithstanding the powers vested in the Authority by this Act, the Central Bank or any person authorized by the Authority may in writing, and if so directed by the Minister for the time being responsible for finance shall, cause an inspection to be made of a unit trust and where such an inspection is made the unit trust shall furnish all books, accounts, documents, or information to the Authority or any person authorized by the Authority.
(2) Any officer and any person employed in carrying out the provisions of this section shall regard and deal with all documents and information relating to an inspection, which may come to his knowledge by virtue of his duties, as confidential.
(3) Any person who contravenes the positions of this section shall be guilty of an offence and liable to a fine not exceeding one hundred thousand shillings or to imprisonment for a term not exceeding two years or both.
Court may Confer Additional Powers of Management.
17. (1) Subject to any contrary intention expressed in the trust deed in respect of any unit trust, where in the opinion of the High Court any sale or other disposition, or any purchase, investment, acquisition, retention, expenditure, or other transaction, is expedient in the management or administration of any money, investments or other property for the time being subject to the trusts governing a unit trust, or would be in the best interests of the unit holders of the unit trust, but it is inexpedient or difficult or impracticable to effect the same without the assistance of the Court, or the same cannot be effected by reason of the absence of any power for that purpose vested in the trustee or manager of the unit trust by the trust deed or by law, the High Court may by order confer upon the trustee or manager, either generally or in any particular instance, the necessary power for the purpose, on such terms and subject to such provisions and conditions (if any) as that Court may think fit, and may give such directions as it thinks fit to the trustee or manager in respect of the exercise of any power conferred by the order,
(2) An application to the High Court under this section may be made by either the manager or the trustee or any unit holder.
Temporary Managers.
18. (1) If any vacancy occurs in the office of manager of a unit trust, the trustee thereof shall have the power to appoint a qualified company as temporary manager thereof, which temporary manager shall have all the powers conferred on the manager by the trust deed or by law until a manager is appointed.
(2) Upon any such vacancy occurring, the trustee of the unit trust shall summon a meeting of the unit holders of the unit trust, and shall take such steps as that meeting or any subsequent meeting of those unit holders may require to secure the appointment of that company or some other qualified company as manager of the unit trust.
Trust Deed Not to Exempt Trustee or Manager from Liability.
19. (1) The trustee of a unit trust and the manager there of shall each have the same duty to observe care and diligence in the performance of its duties as any other trustee, and shall each be entitled to the same indemnities and relief as any other trustee.
(2) Any provision in a trust deed governing a unit trust or in any other instrument shall be void so far as it would have the effect of -
(a) exempting the trustee or manager or any director or officer of the trustee or manager from liability for breach of trust where it or he fails to show the degree of care and diligence required of it or him in that capacity, having regard to the provisions of the trust deed and the powers, authorities or discretions conferred thereby;
(b) indemnifying the trustee or manager or any such director or officer from any such liability.
Registrar and Keeping of Register.
20. (1) There shall be kept at the office of the Registrar a register of all unit trusts, wherein shall be entered all such matters as are prescribed.
(2) The Registrar-General and the Deputy Registrar General shall be respectively the Registrar of Unit Trusts and the Deputy Registrar of Unit Trusts for the purpose of this Act.
(3) Any person may inspect the documents kept by the Registrar on payment of the prescribed fee and may require a certificate of the registration of any unit trust or a copy or extract of any other document or any part of any other document to be certified by the Registrar on payment of the prescribed fee for such certificate, certified copy or extract.
(4) No process for compelling the production of any documents kept by the Registrar shall issue from any court except with the leave of that court, and any such process if issued shall bear thereon a statement that it is issued with the leave of the court.
(5) A copy of, or extract from, any document kept and registered at the office of the Registrar, certified to be a true copy under the hand of the Registrar (whose official position it shall not be necessary to prove), shall in all legal proceedings be admissible as prima facie evidence of such document or extract, ay the case may he, and of the matters, transactions and accounts therein recorded.
(6) The Registrar shall not, in any legal proceeding to which he is not a party, be compellable -
(a) to produce any document the contents of which can be proved under subsection (3) of this section, or
(b) to appear as a witness to prove the matters, transactions or accounts recorded in any such document,
unless by order of the court made for special cause.
Offences.
21. (1) Any person who, in contravention of this Act or any regulations made thereunder -
(a) issues any interest in a unit trust or offers any such interest to the public for subscription or purchase, or invites the public to subscribe for or purchase
such an interest; or
(b) issues any form of application for interests in a unit rust or continues any activities related to any unit trust,
shall be guilty of an offence and liable to a fine not exceeding one hundred thousand shillings, or in the case of an individual to imprisonment for a term not exceeding six months or to a fine not exceeding ten thousand shillings or to both.
(2) Any person who contravenes any of the provisions of this Act for which no penalty is provided shall be guilty of an offence and liable to a fine not exceeding twenty thousand shillings, or in the case of an individual to imprisonment for a term not exceeding two months or to a fine not exceeding two thousand shillings or to both.
Power of High Court to Assess Damages Against Delinquent Directors or Manager.
22. (1) If, in the course of winding up any company that is the manager of a unit trust, it appears that the company has misapplied or retained or become liable or accountable for any money or property of the unit trust, or committed any misfeasance or breach of trust in relation to the unit trust, the High Court may, on the application of the Official Receiver or of the liquidator or of the trustee or of any unit holder, inquire into the conduct of any past or present director, manager or liquidator, or any officer of the company who has been a party to or knowingly permitted the misapplication, retention, misfeasance or breach of trust, and compel him to repay or restore the money or property or any part thereof respectively with interest at such rate as the High Court thinks just or to contribute such sum to the assets of the trust by way of compensation in respect of the misapplication, retention, misfeasance or breach of trust as the Court thinks just.
(2) The provisions of this section shall have effect notwithstanding that the act is one for which the offender may be criminally liable.
(3) Where an order for payment of money is made under this section, the order shall be deemed to be a final decree within the meaning of section 3 (g) of the Bankruptcy Act.
Regulations.
23. The Minister may make regulations for the better carrying out of the purposes of this Act, and in particular and without prejudice to the generality of the foregoing power the Minister may make regulations -
(a) prescribing anything which under this Act may be prescribed;
(b) prescribing the maximum commission that may be charged, and the maximum charge for administration and other expenses that may be made, by the manager or trustee of any unit trust;
(c) prescribing the fees to be paid on the lodging or filing of any documents in respect of a unit trust with the Registrar, and on the inspection of any such documents;
(d) prescribing the manner in which the accounts and records of the unit trust are to be kept and published or made available; and
(e) prescribing the manner in which managers or trustees shall exercise their functions in relation to unit trusts.
Existing unit trusts.
24. The terms of any trust created before the commencement of this Act in pursuance of a unit trust scheme or arrangement may, notwithstanding anything in any deed or other instrument, be varied or supplemented by a deed made between the trustee and manager under the scheme or arrangement, or otherwise as the Minister may approve, to enable compliance with the requirements of this Act and any regulations made thereunder.
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