KENYA Law and Practice Contributed by: Sammy Ndolo, Brian Muchiri, Nicholas Owino and Valere Nyaboke, Cliffe Dekker Hofmeyr
Even if a company falls under the small or dormant company exemptions, its members (owners or share - holders) can still require an audit by providing the company with formal notice. The company’s directors or members vote to appoint and remove an auditor. A simple majority vote is required for appointment, but a special resolution from the members is required for removal. 6.2 Risk Management and Internal Controls The Companies Act and the CMA Governance Code establish specific requirements for directors in relation to risk management and internal controls: • directors’ report – directors must prepare a report for each financial year, which should include a business review detailing the company’s principal risks and uncertainties; and • internal control systems – the boards of listed com - panies must: (a) establish and regularly review the adequacy and integrity of the company’s internal control systems; (b) ensure compliance with applicable laws and regulations; and (c) establish an effective risk management frame - work. There are no requirements for private or public com - panies to report on ESG issues. However, companies listed on the NSE have reporting requirements, as fol - lows. • Companies Act: The directors’ report for listed companies must incorporate a business review section. This section delves into the company’s environmental practices, employee treatment and social and community involvement. • NSE ESG Disclosures Guidance Manual (“ESG Manual”): Issued in late 2021, this manual provides listed companies with a framework for collecting, analysing and publicly disclosing ESG information. 7. Environmental, Social and Governance 7.1 ESG Requirements
The objective is to achieve alignment with interna - tionally recognised reporting standards. In addition, certain industries, such as the banking sector, have established their own ESG-related guide - lines. For instance, the Kenya Bankers Association’s Sustainable Finance Initiative (“SFI”) encourages its member banks to: • implement robust environmental and social risk management systems; and • publish comprehensive sustainability reports bian - nually (every two years). 7.2 ESG Developments Despite the global political debate and partial push - back against ESG in some jurisdictions, there has been no material retreat from ESG in Kenya. Instead, the trend has been toward greater formalisation and integration of ESG considerations, particularly for The most significant change is in the environmental component, where climate-related risks are increas - ingly treated as financial and operational risks rather than purely reputational issues. This is especially evident in the financial sector, where regulators and industry bodies are encouraging structured climate risk management and more robust environmental dis - closures. Governance Component The governance component is also strengthening, with clearer expectations around board-level over - sight of ESG matters, including sustainability strategy, risk management and the integrity of ESG disclosures. ESG is increasingly viewed as part of core corporate governance rather than as a voluntary form of corpo - rate social responsibility. Social Component By contrast, the social component has evolved more incrementally, with the primary change being enhanced transparency and reporting rather than new substantive legal obligations. listed and regulated entities. Environmental Component
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