KENYA Trends and Developments Contributed by: Sammy Ndolo, Brian Muchiri, Nicholas Owino and Valere Nyaboke, Cliffe Dekker Hofmeyr
board decision-making across both listed and unlisted entities. At the same time, issuers are aligning domestic gov - ernance practices with global benchmarks, particular - ly the revised G20/OECD Principles of Corporate Gov - ernance and the emerging sustainability disclosure frameworks under IFRS S1 and IFRS S2, issued by the International Sustainability Standards Board (ISSB). This convergence is reshaping expectations around board conduct, disclosure quality and accountability standards. This evolution has been underpinned by sustained regulatory reform led by the Capital Markets Authority (the “CMA”), enhanced supervisory sophistication and an increasingly discerning investor base. Institutional and foreign investors, in particular, now treat govern - ance excellence as a baseline requirement for capital deployment, reinforcing market–driven incentives for continued governance maturation. The Nairobi Securities Exchange (NSE) Listing Rules complement CMA regulations by prescribing specific One of the most defining governance developments in Kenya over the past year has been the recalibration of board responsibilities, composition and account - ability. Boards have re–emerged as the central gov - ernance actors, with heightened expectations around independence, strategic stewardship, ESG supervi - sion and holistic risk oversight. Board composition, independence and architecture The coming into force of the Capital Markets (Public Offers, Listings and Disclosures) Regulations, 2023 (“POLD Regulations”) has materially reshaped board architecture across listed issuers. The “Board Opera - tions and Control” principle recorded the greatest year–on–year improvement, increasing by 9.44%, driven by clearer differentiation between executive, governance obligations, including: • related-party transaction approvals; • continuing disclosure requirements; and • board composition standards. Board Oversight and Effectiveness
non–executive and independent non–executive direc - tors, stricter compliance with independence thresh - olds and tenure limits and enhanced scrutiny of cross– directorships, conflicts of interest and related–party relationships. Notably, the POLD Regulations have reduced the maximum tenure for independent direc - tors from nine years to six years, after which a direc - tor may be retained but must be re-designated as a non-executive director. The chairperson must be a non-executive member and cannot hold such a posi - tion in more than two publicly listed companies at any one time. Boards are increasingly structured to ensure inde - pendence not only in form, but in substance. Regula - tors are paying closer attention to decision–making dynamics, particularly in companies dominated by founders, controlling shareholders or state interests. Under the POLD Regulations, independent directors must constitute at least one-third of the total number of board members and non-executive directors can - not hold executive positions in related entities, ensur - ing they provide impartial oversight free from influence by personal or professional connections within a cor - porate group. This has accelerated board refreshment efforts and reinforced expectations that independent directors play an active and influential role in govern - ance oversight. Board committees and delegated oversight Board committees have undergone a substantive transformation from procedural constructs into func - tional governance engines. Audit, risk and nomina - tion committees are now expected to operate under clearly articulated mandates and charters, with meas - urable outputs and demonstrable oversight effective - ness. Audit committees, in particular, are subject to heightened independence and financial literacy requirements and carry responsibility for reviewing internal controls and risk management systems. Risk committees have seen their remit expand beyond traditional financial risks to encompass operational, cyber, environmental, social and governance (“ESG”) and technology–related exposures, including emerg - ing risks associated with artificial intelligence systems. Nomination committees are also assuming a more deliberate role in board refreshment, skills alignment
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