Unit Trust Deed (Kenya)
UNIT TRUST DEED
Capital Markets Act Cap. 485A | Capital Markets (Collective Investment Schemes) Regulations 2001 | Trusts Act No. 11 of 2020
THIS UNIT TRUST DEED is made on [Deed Date]
BETWEEN:
(1) [Fund Manager Name] (CMA Licence No. [Fund Manager CMA Licence]), of [Fund Manager Address] (the "Fund Manager"); and
(2) [Trustee Name], of [Trustee Address] (the "Trustee").
Investment Adviser (if appointed): [Investment Adviser Name]
RECITALS
A. The Fund Manager is licensed by the Capital Markets Authority (CMA) to carry on the business of fund management in Kenya under the Capital Markets Act Cap. 485A and the Capital Markets (Fund Managers) Regulations 2020.
B. The Trustee is authorised to act as trustee and custodian of collective investment schemes in Kenya under the Trusts Act No. 11 of 2020 and has been approved by the CMA for this purpose.
C. The parties wish to establish a unit trust fund known as [Fund Name] (CMA Approval No. [CMA Approval Number]), domiciled in [Fund Domicile], to be offered to investors in Kenya on the terms set out in this Deed and subject to CMA approval.
D. The fund is planned to launch on [Launch Date] subject to CMA approval of this Deed and the fund prospectus.
1. ESTABLISHMENT AND REGULATORY FRAMEWORK
1.1 The Fund Manager and the Trustee hereby establish the [Fund Name] (the "Fund") as a unit trust, being a collective investment scheme regulated under the Capital Markets Act Cap. 485A and the Capital Markets (Collective Investment Schemes) Regulations 2001.
1.2 The Fund is established as a trust under the Trusts Act No. 11 of 2020. The Trustee holds the fund assets on trust for unit holders in accordance with this Deed.
1.3 No units may be offered to the public in Kenya without prior CMA approval of this Deed and the Fund's prospectus under Section 30 of the Capital Markets Act Cap. 485A.
2. UNITS
2.1 Unit classes: [Unit Classes].
2.2 Minimum initial subscription: [Minimum Subscription] per unit holder.
2.3 Minimum redemption: [Minimum Redemption] per transaction.
2.4 Unit price (NAV) publication: Unit prices shall be published [NAV Frequency] in accordance with the Capital Markets (Collective Investment Schemes) Regulations 2001.
2.5 Redemption settlement: Redemption proceeds shall be paid to unit holders within [Redemption Settlement] of the redemption request.
3. INVESTMENT OBJECTIVE AND POLICY
3.1 Investment objective: [Investment Objective].
3.2 Permitted asset classes: [Permitted Assets].
3.3 The Fund Manager shall invest the fund assets in accordance with the investment policy statement approved by the CMA and in compliance with the concentration limits and investment guidelines prescribed by the Capital Markets (Collective Investment Schemes) Regulations 2001.
3.4 Offshore investments, where permitted, are subject to CBK foreign exchange regulations under the Central Bank of Kenya Act Cap. 491.
4. FEES AND DISTRIBUTIONS
4.1 Management fee: [Management Fee] of the Fund's NAV, accrued daily and payable monthly in arrears from the Fund's assets.
4.2 Trustee / custodian fee: [Trustee Fee] of NAV, payable monthly in arrears.
4.3 Entry charge: [Entry Charge].
4.4 Exit charge: [Exit Charge].
4.5 Income distribution: [Distribution Frequency]. All income distributions shall be made net of applicable withholding taxes under the Income Tax Act Cap. 470.
5. TRUSTEE'S ROLE AND OBLIGATIONS
5.1 The Trustee shall hold the Fund's assets in safe custody, segregated from the assets of the Fund Manager and the Trustee's own assets, in accordance with the Capital Markets (Collective Investment Schemes) Regulations 2001 and the Trusts Act No. 11 of 2020.
5.2 The Trustee shall verify that each investment instruction from the Fund Manager complies with this Deed, the investment policy, and the CMA Regulations before execution.
5.3 The Trustee shall independently verify the NAV calculation prepared by the Fund Manager and report any discrepancies to the CMA.
5.4 The Trustee shall exercise the duty of care required under Section 36 of the Trusts Act No. 11 of 2020 in the performance of its custodial obligations.
6. WINDING-UP
6.1 The Fund shall be wound up in the following circumstances: [Winding-Up Trigger].
6.2 On winding-up, the Fund Manager shall notify the CMA and all unit holders in writing, suspend the issue and redemption of units, realise fund assets in an orderly manner, settle outstanding liabilities, and distribute the net proceeds to unit holders on a pro-rata basis.
6.3 The Trustee shall oversee the winding-up process to ensure the equal and fair treatment of all unit holders within each unit class.
7. GOVERNING LAW AND DISPUTE RESOLUTION
7.1 This Deed is governed by the laws of Kenya, including the Capital Markets Act Cap. 485A, the Trusts Act No. 11 of 2020, and the Law of Contract Act Cap. 23.
7.2 Disputes between the Fund Manager and the Trustee shall be resolved by: [Dispute Resolution].
IN WITNESS WHEREOF, the parties have executed this Unit Trust Deed on the date first written above.
Fund Manager (Authorised Signatory)
________________
Signature
Trustee (Authorised Signatory)
________________
Signature
Witness
________________
Signature
What Is a Unit Trust Deed (Kenya)?
An Unit Trust Deed in Kenya conveys rights in land or assets, taking effect once executed by the parties to it.
Unit trust funds in Kenya are collective investment schemes regulated by the Capital Markets Authority (CMA) under the Capital Markets Act Cap. 485A, the Capital Markets (Collective Investment Schemes) Regulations 2001 (as amended), and the Capital Markets (Fund Managers) Regulations 2020. The CMA is the statutory regulator of capital markets in Kenya, established under the Capital Markets Act Cap. 485A, and has authority to approve, supervise, and take regulatory action against unit trust funds and their managers. No unit trust fund may be established or offered to the Kenyan public without prior CMA approval of the Unit Trust Deed and the fund manager.
The Trusts Act No. 11 of 2020 — which replaced the Trustees Act Cap. 167 — applies to the trust aspects of a unit trust fund in Kenya, including the obligations of the trustee (custodian), trustee powers, the duty of care, and the appointment and removal of trustees. The trustee of a Kenyan unit trust fund acts as a custodian: it holds the fund's assets separately from those of the fund manager, monitors the fund manager's compliance with the Unit Trust Deed and CMA regulations, and acts as the independent protector of unit holders' interests. The trustee must be a licensed trust company under the Trusts Act No. 11 of 2020 or a bank or financial institution approved by the CMA.
The Capital Markets (Collective Investment Schemes) Regulations 2001, made under the Capital Markets Act Cap. 485A, govern the specific requirements for Kenyan unit trust fund deeds, including disclosure obligations in the fund's prospectus, the valuation of units (NAV calculation), the maximum management fees, the frequency of unit price publication, and the minimum subscription thresholds. The regulations require the Unit Trust Deed to be submitted to the CMA for approval before the fund is launched, and any material amendment to the deed requires fresh CMA approval.
Kenyan unit trust funds invest in a range of asset classes, including Treasury Bonds issued by the National Treasury, Treasury Bills, listed equities on the Nairobi Securities Exchange (NSE) regulated under the Capital Markets Act Cap. 485A, corporate bonds, real estate investment trusts (REITs), and offshore assets subject to CBK foreign exchange regulations under the Central Bank of Kenya Act Cap. 491. The Unit Trust Deed must specify the fund's investment objectives, the permissible asset classes, any concentration limits, and the benchmark against which performance is measured.
Income earned by a Kenyan unit trust fund — dividends, interest, and capital gains — is subject to taxation under the Income Tax Act Cap. 470. Withholding tax is deducted at source on dividends and interest at applicable rates. Capital gains on listed securities are currently exempt under the Capital Markets Act Cap. 485A schedule exemptions but are otherwise subject to Capital Gains Tax at 15% under the Income Tax Act Cap. 470 as amended by the Finance Act 2023.
When Do You Need a Unit Trust Deed (Kenya)?
A Unit Trust Deed in Kenya is required in the following specific circumstances involving the establishment and operation of a collective investment scheme.
A Unit Trust Deed is needed when a licensed fund manager or financial institution in Kenya wishes to establish a new unit trust fund to be offered to retail or institutional investors. The Capital Markets Authority (CMA) requires a fully executed Unit Trust Deed as part of the fund registration application under the Capital Markets (Collective Investment Schemes) Regulations 2001 made under the Capital Markets Act Cap. 485A. The deed must be submitted to the CMA together with a prospectus, a fund manager licence, a trustee appointment letter, and the fund's investment policy statement.
A Unit Trust Deed is required when an existing unit trust fund in Kenya wishes to launch a new sub-fund or unit class with different investment objectives, fee structures, or investor eligibility criteria. Each sub-fund must be documented in the Unit Trust Deed (or a supplemental deed) and separately approved by the CMA.
A Unit Trust Deed is needed when a Kenyan pension fund, insurance company, or SACCO registered under the Co-operative Societies Act Cap. 490 decides to invest members' or policyholders' funds through a pooled unit trust vehicle rather than managing individual portfolios. The Retirement Benefits Authority (RBA) under the Retirement Benefits Act No. 3 of 1997 may require the pension fund's investment in a unit trust to comply with prescribed investment guidelines, and the Unit Trust Deed must demonstrate CMA authorisation.
A Unit Trust Deed is required when a real estate developer or property investment group in Kenya seeks to establish a property unit trust (PUT) to pool investor contributions for property acquisition and development, offering investors units representing proportionate interests in the property portfolio. Property unit trusts in Kenya are regulated by the CMA under the Real Estate Investment Trusts (REITs) framework as well as the Capital Markets Act Cap. 485A.
A Unit Trust Deed is needed when an employer in Kenya establishes an employee share ownership plan (ESOP) or equity savings trust for employees, using a unit trust structure to manage the pooled equity allocation, define vesting schedules, and administer unit redemption upon employment termination. The CMA must approve such schemes where they involve public company shares listed on the Nairobi Securities Exchange (NSE).
A Unit Trust Deed is also required when a licensed fund manager amends the terms of an existing CMA-approved unit trust fund — for example, changing the investment mandate, the trustee, the management fee cap, or the redemption frequency — as a material amendment requires a supplemental deed and fresh CMA approval under the Capital Markets (Collective Investment Schemes) Regulations 2001.
What to Include in Your Unit Trust Deed (Kenya)
A Kenya Unit Trust Deed under the Capital Markets Act Cap. 485A and the Trusts Act No. 11 of 2020 must contain the following essential elements to satisfy CMA registration requirements and protect unit holders' interests.
Fund Identity and CMA Registration: The full legal name of the fund, the CMA reference number upon approval, the date of establishment, the domicile of the fund (Kenya), and the governing law. The Unit Trust Deed must recite the authority of the Capital Markets Act Cap. 485A and the Capital Markets (Collective Investment Schemes) Regulations 2001 as the primary regulatory framework.
Parties: Full legal names and addresses of the fund manager (a CMA-licensed fund manager under the Capital Markets (Fund Managers) Regulations 2020), the trustee (a licensed trust company or CMA-approved custodian), and, where applicable, the investment adviser. The deed must state the fund manager's CMA licence number and the trustee's registration under the Trusts Act No. 11 of 2020.
Trust Property and Units: A description of the initial trust fund, the basis of unit valuation (Net Asset Value (NAV) per unit), the classes of units (growth units, income units, or institutional units), the minimum subscription amount, the minimum redemption amount, and the frequency of unit pricing. The Capital Markets (Collective Investment Schemes) Regulations 2001 require unit prices to be published in a newspaper of national circulation or on the fund manager's website.
Investment Objectives and Policy: The investment objective of the fund (capital growth, income generation, or balanced), the permitted asset classes (equities listed on the Nairobi Securities Exchange (NSE), Treasury Bonds, corporate bonds, offshore assets, cash and money market instruments), the maximum exposure limits per asset class and per issuer, and the benchmark index for performance measurement.
Fund Manager's Powers and Obligations: The fund manager's powers to invest, divest, borrow on behalf of the fund (subject to CMA borrowing limits), enter into derivatives (if permitted), and engage sub-investment managers. The fund manager must comply with the investment policy, disclose conflicts of interest, and submit regular reports to the trustee and the CMA under the Capital Markets (Fund Managers) Regulations 2020.
Trustee's Role and Custodian Obligations: The trustee's obligations under the Trusts Act No. 11 of 2020 and the Capital Markets (Collective Investment Schemes) Regulations 2001, including safekeeping of fund assets, verification of fund manager instructions against the Unit Trust Deed and investment policy, independent oversight of NAV calculations, and reporting to unit holders and the CMA. The trustee must exercise the duty of care under Section 36 of the Trusts Act No. 11 of 2020.
Fees and Charges: The management fee (expressed as an annual percentage of NAV), the trustee fee, the custodian fee, transaction charges, and any performance fee, all subject to the CMA's maximum permitted fee caps under the Capital Markets (Collective Investment Schemes) Regulations 2001.
Distribution and Redemption: The frequency of income distributions to unit holders, the treatment of accumulated income in growth unit classes, the redemption process and settlement period, and any early redemption charges. The Capital Markets Act Cap. 485A requires fair and equal treatment of unit holders within the same unit class.
Winding-Up and CMA Approval: The circumstances in which the fund may be wound up — including material reduction in fund size, regulatory direction by the CMA, or unit holder resolution — and the procedure for distributing the remaining fund assets to unit holders on a pro-rata basis. Material amendments to the Unit Trust Deed require CMA approval under the Capital Markets (Collective Investment Schemes) Regulations 2001. The forms-legal.com Kenya Unit Trust Deed template covers all CMA-required elements under the Capital Markets Act Cap. 485A and the Trusts Act No. 11 of 2020, suitable for money market funds, equity funds, and balanced funds registered with the Capital Markets Authority.
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"Unit Trust Deed (Kenya) (Kenya)." Forms Legal, 2026, https://forms-legal.com/kenya/estate-planning/trusts/unit-trust-deed-kenya.
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howpublished = {\url{https://forms-legal.com/kenya/estate-planning/trusts/unit-trust-deed-kenya}},
note = {Free legal document template}
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Frequently Asked Questions
A Unit Trust Deed in Kenya is primarily governed by two statutes. The Capital Markets Act Cap. 485A — administered by the Capital Markets Authority (CMA) — governs the regulatory framework for collective investment schemes, including unit trust funds, in Kenya. The Capital Markets (Collective Investment Schemes) Regulations 2001 made under the Capital Markets Act Cap. 485A set out detailed requirements for the content of a Unit Trust Deed, fund manager licensing, trustee obligations, unit pricing, fee disclosure, and CMA approval procedures. The second governing statute is the Trusts Act No. 11 of 2020, which replaced the Trustees Act Cap. 167 and governs the trust aspects of the unit trust structure — including the creation of the trust, the obligations of the trustee, the duty of care, and the appointment and removal of trustees. The Income Tax Act Cap. 470 governs the taxation of fund income and unit holder distributions. The Central Bank of Kenya Act Cap. 491 applies where the fund invests in foreign assets subject to CBK foreign exchange regulations. No unit trust fund may be offered to the public in Kenya without prior CMA approval.
Yes. No unit trust fund may be established, offered, or marketed to the Kenyan public without prior approval of the Unit Trust Deed by the Capital Markets Authority (CMA) under Section 30 of the Capital Markets Act Cap. 485A and the Capital Markets (Collective Investment Schemes) Regulations 2001. The CMA review process involves submission of the proposed Unit Trust Deed, the fund prospectus, the fund manager's CMA licence, the trustee appointment documentation, the fund's investment policy statement, and the fund manager's compliance manual. The CMA reviews the documents for compliance with the Regulations and may require amendments before granting approval. An approved unit trust fund is listed on the CMA's register of approved collective investment schemes, which is publicly accessible on the CMA website (cma.or.ke). Operating a unit trust fund without CMA approval constitutes a criminal offence under the Capital Markets Act Cap. 485A, and the CMA has authority to shut down unauthorised fund operations and pursue criminal prosecution of fund managers.
The trustee of a Kenyan unit trust fund serves as the independent custodian and protector of unit holders' interests. Unlike a private trust where the trustee actively manages the trust property, the trustee of a unit trust fund delegates day-to-day investment management to the fund manager but retains oversight and custody functions. The trustee's core responsibilities under the Capital Markets (Collective Investment Schemes) Regulations 2001 and the Trusts Act No. 11 of 2020 include: safekeeping of fund assets separate from the fund manager's own assets; verifying that the fund manager's investment instructions comply with the Unit Trust Deed and investment policy before execution; independently verifying the NAV calculation prepared by the fund manager; overseeing the fund's compliance with CMA regulations; reporting any breaches by the fund manager to the CMA; and distributing fund assets to unit holders upon winding-up. The trustee must be a licensed trust company or a CMA-approved bank or financial institution. The trustee owes a fiduciary duty to the unit holders and must exercise the care and skill required under Section 36 of the Trusts Act No. 11 of 2020. The trustee charges a fee — typically 0.1% to 0.3% of NAV per annum — for its services.
The taxation of a Kenyan unit trust fund involves multiple layers under the Income Tax Act Cap. 470. At the fund level, interest income earned on Treasury Bonds and corporate bonds is subject to withholding tax deducted at source by the payor at 15% for residents. Dividend income from listed equities on the Nairobi Securities Exchange (NSE) is subject to withholding tax at 5% for residents, deducted at source. Capital gains on the sale of listed securities were exempt from Capital Gains Tax under the Capital Markets Act Cap. 485A schedule but are now subject to CGT at 15% under the Income Tax Act Cap. 470 as amended by the Finance Act 2023 for disposals after January 2024. At the unit holder level, income distributions from the fund to individual unit holders are typically made net of withholding tax deducted at the fund level. Unit holders who are companies must include fund income in their taxable income. Kenyan residents can claim the withholding taxes deducted at the fund level as a credit against their own income tax liability. Fund managers should provide unit holders with annual tax certificates summarising income distributions and withholding taxes deducted to assist unit holders in preparing their KRA income tax returns under the Income Tax Act Cap. 470.
Yes, a Kenya unit trust fund may invest a portion of its assets offshore, subject to the investment limits prescribed by the Capital Markets Authority (CMA) under the Capital Markets (Collective Investment Schemes) Regulations 2001 and the foreign exchange regulations of the Central Bank of Kenya (CBK) under the Central Bank of Kenya Act Cap. 491. The CMA regulations currently permit unit trust funds to invest up to a specified percentage of NAV in approved offshore markets and asset classes — including listed equities on approved foreign exchanges, offshore bonds, and foreign money market instruments. Offshore investment requires the fund manager to comply with the CBK's capital flows reporting requirements and the Foreign Exchange (Forex) Act regulations governing cross-border capital movements. The Unit Trust Deed must explicitly authorise offshore investment, specify the permitted markets and currencies, and address the currency risk management policy. Unit holders bear foreign exchange risk on the offshore portion of the fund unless the fund employs hedging strategies. Returns from offshore investments are subject to Kenyan income tax at applicable withholding rates and capital gains tax treatment under the Income Tax Act Cap. 470.
When a Kenya unit trust fund is wound up, the process is governed by the winding-up provisions of the Unit Trust Deed, the Capital Markets (Collective Investment Schemes) Regulations 2001, and the Trusts Act No. 11 of 2020. The fund may be wound up in several circumstances: a CMA direction to wind up due to regulatory non-compliance or fund manager licence revocation; a resolution of unit holders holding a specified percentage of units (as stated in the deed); or the fund falling below a minimum viable size as specified in the deed. On the commencement of winding-up, the fund manager must notify the CMA and all unit holders in writing, suspend the issue and redemption of units, realise the fund's assets in an orderly manner, settle all outstanding liabilities including fees payable to the fund manager and trustee, and distribute the net proceeds to unit holders on a pro-rata basis according to the number of units held. The trustee oversees the winding-up process to ensure fair and equal treatment of unit holders. Any surplus remaining after all liabilities are settled is distributed to unit holders in proportion to their unitholdings. The CMA must be notified of the completion of winding-up and the fund's name is removed from the CMA register of approved collective investment schemes.
This template is provided for informational purposes only and does not constitute legal advice. Laws vary by jurisdiction and change over time. Consult a qualified attorney for advice specific to your situation.Full disclaimer
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