Licensing of Copyright Collective Management Organisations (CMOs) in Kenya

The Kenya Copyright Board (KeCoBo) has the responsibility of licensing and supervising collective management organisations (CMOs) in Kenya under section 46 of the Copyright Act of 2001. This is to ensure that CMOs carry out their core function; collection and distribution of royalties.

Public Notice:
Where no collective management organisation exists in respect to a certain category of works, or the license has been revoked, KeCoBo shall through a public notice invite applications.

Before KeCoBo grants any license to a CMO, it must ensure that the CMO conforms to the requirements under section 46 of the Copyright Act and Rules 15 and 16 of the Copyright Regulations of 2005.

The application has to be made in the prescribed form accompanied by the requisite fee of Kshs 10,000 and the following documents attached:
For new applications:
a) Certified copy of the Certificate of Registration;
b) Certified copy of the Memorandum and Articles of Association;
c) Certified copies of the annual returns where applicable.
d) Where the CMO has recently been registered, the audited accounts of the year preceding the application where applicable.
e) A report of its operations during the year preceding the application.
f) Deeds of assignment of rights by the members
g) The capacity for collection and distribution of the royalties

Renewal of License

The application has to be made atleast 3 months prior to the expiry of the license and should include:

a) Certified copy of the certificate of registration
b) Certified copy of the memorandum and articles of association
c) Certified copies of the annual returns
d) Certified copeis of the auidited accounts for the year preceding application
e) The organisational structure of the CMO and the names and qualifications of the senior management.
f) A statement of the amount of money collected and distrubuted as royalties in the year preceding the application.
g) The list of their memebers which has to have their signatures and ID/passport numbers.
h) A report of its operations during the year preceding the application.
i) Deeds of assignment of rights by the mebers.

The application will only be considered after the payment of the requisite fees and submission of the relevant documents three (3) months before.

KeCoBo has to be satisfied that the society has the capacity to collect and distribute the royalties and in addition to the above, it shall consider:
a) The collection and distrubtion of the royalties
b) Qualification of professional staff (accounts, licensing, legal)
c) That the CMO adheres to the principles of corporate governance (the qualification of the Board members, how they are eleceted/selected? How are the elections carried out).
d) Particulars of the directors
e) That the menbership is fully representative of the class that it collects and distrubutes royalties for.
f) That the administrative costs are minimal. KeCoBo will be guided by the international rules whereby the administrative costs do not exceed 30% of the royalties collected. For established CMOs, the administrative costs should be minimal. For new CMOs, KeCoBo may waive this requirement but only for the first one year. Thereafter, the administrative costs should not exceed 30% the royalties collected.
g) That the royalties are regularly and properly distributed using the distribution rules.
h) The particulars of the senior management.
i) The number of staff and their qualifications.
j) The systems put in place to ensure that the royalties are collected and properly distributed.
k) Carry out a balance sheet and profit and loss analysis.
l) The audited accounts submitted.
m) Utilisation of information and communication technology.

KeCoBo has the mandate to ask for any further information and clarification that may be used to determine the application submitted. It must satisfied that the CMO has the legal and institutional capacity to carry out its objectives and function effectively.

Where applications have been received, the Executive Director shall send an auditor to the CMO to audit and prepare a report which shall then be submitted to the Audit and Legal Affairs Committees for consideration. This will then be submitted to the Board of Directors with the appropriate recommendations.
Where the applicant has fulfileed the set requirements, the Board shall recommend the CMO be licensed for one year. Where the applicant fails to fulfil the requirements, the report shall indicate the same. Where the situation can be remedied the Board may request for further documentary evidence or clarification.
Once the application has been approved, the Executive Director will issue a one year License and publish the same in the Kenya Gazette.

The CMO will only be allowed to operate as such where they have a valid license from KeCoBo.
Where more than one organisation has applied for the same class of works, the Board shall be guided by the provisions above and shall evaluate each application separately.

CMOs deal with public funds in the sense that they collect and distribute money on behalf of their members. KeCoBo has a duty to ensure that these funds are properly managed and distributed to the rights holders. Where the CMO has been granted a license, KeCoBo shall supervise its activities and ensure compliance with the regulations in respect to collection and distribution of royalties. In this regard, KeCoBo shall:
a) Inspect and evaluate the activities of the CMO during the year.
b) Carry out a systems and finance audit of the CMO before renewing the license.
c) Monitor and evaluate the operation in respect to the compliance to the set rules.
d) Examine compliance of the CMO in respect to the amount paid in royalties vis-à-vis administrative costs.
e) Examine for the strategic and business development plan to enable to the CMO to maximise collections.
f) Evaluate quarterly or monthly reports covering expenses, royalty distribution and the general management of the CMO.
The CMO shall ensure that they change auditors after a period of three years to ensure accountability and transparency.

Revocation of License
KeCoBo may revoke a license where it finds that the:
a) The CMO no longer fulfils its objective under its Memorandum and Articles of Association
b) The CMO fails to distribute royalties.
c) The CMO distributes royalties without compliance with set distribution rules.
d) The Board of Directors and Management of the CMO fail to observe the principles of corporate governance.
e) The CMO engages in profit-making activities.
f) The CMO has been de-registered as a Company under CAP 486 of the Laws of Kenya.
g) The accounts are not or have not been audited by an independent auditor.
h) The administrative costs are more than 30% of the money collected.
i) The CMO fails to fulfill its obligations under the Copyright Act of 2001.
j) Where the management and or the members of the Board engage in activities that are prejudicial to the interests of the members such as corruption, abuse of office and mismanagement.

Procedure for the revocation of a license:

1. KeCoBo shall audit the CMO
2. The Executive Director shall ensure that an audit report is tabled to Audit and Legal Affairs Committee for deliberation.
3. Legal Affairs and Audit report shall be forwarded to the full Board for deliberation.
4. The Executive Director shall give the CMO a notice to show cause within 14 days.
5. The response shall be discussed by the Legal Affairs Committee who shall table the recommendations to the Full Board.
6. The Executive Director shall communicate the decision of the Board in writing to the CMO.
7. The Board shall issue a public notice on the revocation.

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