KENYA Law and Practice Contributed by: Sammy Ndolo, Brian Muchiri, Nicholas Owino and Valere Nyaboke, Cliffe Dekker Hofmeyr
Board Composition and Structure Independent directors – tenure limitation Under the POLD Regulations, an independent director is defined as a board member who is not an execu - tive director, does not have a material or pecuniary relationship with the company or related persons, is compensated through sitting fees or allowances and does not own shares in the company. Critically, after six years of continuous service, such a director shall no longer be considered an independent director. This represents a reduction from the previous nine-year maximum tenure under the previous 2002 Regula - tions. The CMA Circular clarifies that this provision applies prospectively to new appointments only. Existing independent directors whose letters of appointment indicate a nine-year term under the previous Regu - lations may continue to serve as such. Upon expiry of the six-year term, an independent director may be retained but must be redesignated as a non-executive director. Non-executive directors – independence from related entities The POLD Regulations defines a non-executive director as a board member who is not an executive director and is not an executive director or employee of a related entity. This means non-executive direc - tors cannot have formal day-to-day responsibility in a company closely connected or affiliated with the issuer where they serve. The rationale is to uphold independence and objectivity, ensuring non-executive directors offer impartial oversight without influence from personal or professional connections within a corporate group. Board composition requirements The POLD Regulations require that boards comprise a balance of executive and non-executive directors, with a majority of non-executive directors. Independ - ent directors must constitute at least one-third of the total number of board members. The chairperson must be a non-executive member and cannot hold such a position in more than two publicly listed com - panies at any one time. Executive directors are limited to holding such positions in no more than two publicly listed companies.
Corporate Governance Code – Mandatory Compliance A significant development is the settlement of the debate regarding mandatory versus voluntary com - pliance with the CMA Governance Code. The POLD Regulations now provide in mandatory language that every issuer “shall comply” with the Code. CMA Cir - cular confirms that the Code remains in force and that its enforceability has been clarified by this mandatory drafting. Where any conflict arises between the POLD Regula - tions and the CMA Governance Code, the POLD Reg - ulations take precedence. The CMA has indicated it will review and harmonise the CMA Governance Code with the POLD Regulations to ensure consistency. The principal bodies and functions involved in the governance and management of a company in Kenya are the board of directors, the company secretary, the shareholders and the contact person. Board of Directors The board of directors is ultimately responsible for overseeing the company’s affairs. As stipulated by the Companies Act, the directors are entrusted with the power to direct and regulate the company’s business, set strategic direction and ensure compliance. While the board of directors retains ultimate authority, it can delegate specific functions to individual direc - tors, committees, management teams and employ - ees. Company Secretary The Companies Act mandates that public and pri - vate companies with a share capital of KES5,000,000 (approximately USD38,760) or more appoint a com - pany secretary. 2. Corporate Management 2.1 Principal Bodies or Functions The company secretary has various responsibilities, including documenting board and shareholder meet - ings and maintaining registers of directors, sharehold - ers and debenture holders. They also liaise with the
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