Finder's Fee Agreement (Kenya)

A Finder's Fee Agreement in Kenya governs the relationship between the parties by fixing what each must do.

The Law of Contract Act Cap. 23, which applies English common law principles as received into Kenyan law, governs the validity and enforceability of Finder's Fee Agreements in Kenya. A valid agreement requires offer, acceptance, consideration (the promise to pay the finder's fee), and an intention to create legal relations. Courts in Kenya have enforced finder's fee arrangements where the parties have reduced their agreement to writing and have clearly specified the trigger event — the introduction of a specific named third party who subsequently completes a transaction with the principal.

The Estate Agents Act Cap. 533, administered by the Estate Agents Registration Board (EARB), is directly relevant to finder's fees in the real estate sector. Section 4 of the Estate Agents Act Cap. 533 provides that no person shall act as an estate agent in Kenya — that is, negotiate the purchase, sale, or lease of immovable property for a commission — unless registered with the Estate Agents Registration Board. An unregistered person who acts as a real estate finder and receives a commission may be guilty of an offence under the Estate Agents Act Cap. 533. Parties entering Finder's Fee Agreements for real estate transactions must confirm that the finder is either a registered estate agent or that the agreement is structured as a pure introduction fee rather than an estate agency commission.

The Capital Markets Authority (CMA) Act No. 17 of 1989 is relevant to finder's fees in transactions involving securities — for example, where a finder introduces an investor to a company seeking to raise equity capital. A person who arranges or supports investment in securities for a fee may be regulated as a stockbroker, investment adviser, or fund manager under the Capital Markets Act No. 17 of 1989, and must be licensed by the Capital Markets Authority (CMA). A Finder's Fee Agreement in the context of a capital markets transaction should be reviewed to confirm the finder's activities do not constitute regulated investment business under the CMA Act.

The Tax Procedures Act No. 29 of 2015 and the Income Tax Act Cap. 470, both administered by the Kenya Revenue Authority (KRA), require the principal to deduct withholding tax at 5% from finder's fees paid to Kenyan resident individuals under Section 35 of the Income Tax Act Cap. 470 (if the finder provides the service as a professional or in a business capacity). The finder must declare the fee as income and pay tax accordingly. Where the finder is a non-resident, a withholding tax of 20% applies unless reduced by a Double Taxation Agreement (DTA).

The Stamp Duty Act Cap. 480, administered by the KRA, may impose stamp duty on a Finder's Fee Agreement where it constitutes a deed or an instrument under the Act. The parties should obtain a stamp duty assessment from the KRA to confirm the agreement is properly stamped before execution.

A Finder's Fee Agreement in Kenya is required whenever a person or entity introduces a principal to a third party in expectation of a fee or commission, and the parties wish to document and formalise that introduction arrangement before the introduction is made.

A Finder's Fee Agreement is needed when a business consultant, lawyer, accountant, or individual identifies and introduces a buyer to a Kenyan business owner who wishes to sell their company. The finder's fee — typically expressed as a percentage of the enterprise value or transaction value, or as a fixed amount — is payable on completion of the sale. Without a written agreement, the finder has no enforceable claim to the fee and the principal may dispute the entitlement after the transaction closes.

A Finder's Fee Agreement is required when an individual with industry connections introduces an investor — such as a private equity fund, a venture capital firm, a high-net-worth individual, or a development finance institution such as the International Finance Corporation (IFC) or Proparco — to a Kenyan company seeking growth capital. The Finder's Fee Agreement must specify whether the fee is payable on signing of the term sheet, on completion of the investment, or on first drawdown of funds.

A Finder's Fee Agreement is needed when a property broker or consultant introduces a corporate tenant to a commercial landlord for the lease of office space, a retail outlet, or a warehouse in Nairobi, Mombasa, Kisumu, or another Kenyan city, and the broker is not a registered estate agent under the Estate Agents Act Cap. 533. In this context, the agreement must be carefully drafted to avoid characterising the broker's role as estate agency, which would require registration with the Estate Agents Registration Board (EARB).

A Finder's Fee Agreement is required when a Kenyan procurement professional or supply chain consultant introduces a supplier — of goods, equipment, or services — to a purchasing organisation such as a large corporate, a government contractor, or an NGO, and wishes to receive a fee or referral commission on contracts placed with the introduced supplier over a defined period.

A Finder's Fee Agreement is needed when a startup or technology company introduces potential customers, distributors, or channel partners to a client company in exchange for a referral fee or revenue share on business generated through those introductions. In the Kenyan technology sector, such arrangements are common between software companies, fintech firms, and their distribution partners.

A Kenya Finder's Fee Agreement under the Law of Contract Act Cap. 23 must contain the following essential elements to be enforceable and commercially precise.

Parties and Identification: Full legal names and addresses of the finder (the introducer) and the principal (the party receiving the introduction), including National Identity Card (NIC) numbers for individuals or Business Registration Service (BRS) registration numbers and KRA PINs for companies. Where the finder is a company, its authorised signatory and board resolution authorising the agreement should be referenced.

Scope of Introduction: A precise description of the type of introduction the finder is authorised to make — for example, introduction of potential buyers for the principal's business, introduction of investors for a capital raise, introduction of tenants for a property, or introduction of suppliers for a procurement contract. The scope should be specific enough to prevent disputes over whether a particular third party was introduced by the finder or was already known to the principal.

Exclusivity and Territory: Whether the finder is appointed on an exclusive or non-exclusive basis — that is, whether the principal is free to engage other finders simultaneously. The geographic territory within which the finder is authorised to make introductions (for example, Kenya only, East Africa, or globally). An exclusive appointment restricts the principal's ability to appoint other finders within the territory and typically commands a higher or accelerated fee.

Trigger Event for Fee Payment: The precise event upon which the finder's fee becomes payable — for example, completion of a share purchase agreement, drawdown of investment funds, execution of a lease agreement, or placement of a purchase order. The trigger event must be unambiguous. A finder's fee that is expressed to be payable on introduction alone — regardless of whether the transaction completes — is uncommon and increases the principal's risk; most agreements tie payment to completion of a defined transaction.

Fee Quantum and Calculation: The finder's fee amount — either a fixed Kenya Shillings (KES) amount, a percentage of the transaction value (the Lehman scale or a negotiated percentage), or a sliding scale based on transaction size. Where the fee is a percentage of a transaction value, the agreement must define how transaction value is calculated — enterprise value, equity value, gross consideration, or net consideration after adjustments.

Payment Terms and Method: The date by which the fee must be paid after the trigger event occurs (typically within 14 to 30 days of completion), the payment method (bank transfer to a specified account or M-Pesa), and the currency (Kenya Shillings (KES) or a foreign currency for cross-border transactions). Where the fee is large, the principal may negotiate payment in instalments linked to post-completion milestones.

Withholding Tax and Gross-Up: The agreement must address the deduction of withholding tax (5% for Kenyan resident service providers under the Income Tax Act Cap. 470) by the principal from the finder's fee. The finder should confirm whether the stated fee is gross or net of withholding tax, and whether the principal is entitled to deduct withholding tax before remitting the balance to the finder.

Tail Period and Circumvention: A tail period — typically 12 to 24 months after the agreement expires or is terminated — during which the finder remains entitled to the fee if the principal completes a transaction with a party introduced by the finder during the agreement period. An anti-circumvention clause prevents the principal from bypassing the finder by dealing with the introduced party directly or through an affiliate to avoid paying the fee.

Confidentiality: Mutual obligations on both the finder and the principal to keep confidential the existence of the agreement, the identity of introduced parties, and any business information exchanged in connection with the introduction. This clause is consistent with the Data Protection Act No. 24 of 2019 administered by the Office of the Data Protection Commissioner (ODPC).

Governing Law and Dispute Resolution: The agreement is governed by the laws of Kenya, including the Law of Contract Act Cap. 23. Disputes may be referred to arbitration before the Nairobi Centre for International Arbitration (NCIA) under the Arbitration Act No. 4 of 1995, or to the High Court of Kenya or the appropriate Magistrates Court of Kenya under the Civil Procedure Act Cap. 21. The forms-legal.com Finder's Fee Agreement template for Kenya incorporates all mandatory and commercial terms required under the Law of Contract Act Cap. 23, with a tail period clause and an anti-circumvention provision as standard inclusions. Under Kenya law, Section 135 of the Companies Act 2015 (No. 17 of 2015) and Section 15 of the Employment Act 2007 (No. 11 of 2007) govern the core requirements for this type of document.

Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010.