KENYA Trends and Developments Contributed by: Sammy Ndolo, Brian Muchiri, Nicholas Owino and Valere Nyaboke, Cliffe Dekker Hofmeyr
comprehensive AI regulatory framework, introducing a risk-based classification system that categorises AI systems as unacceptable risk (prohibited), high-risk, limited risk or minimal risk. High-risk systems, including those used in healthcare, education, finance, employment and public admin - istration, will be subject to mandatory obligations, including: • risk assessments before deployment; human rights impact assessments; • transparency and explainability requirements; and • record-keeping for at least five years. The AI Bill proposes to establish the Office of the Arti - ficial Intelligence Commissioner as a body corporate with powers to oversee implementation and enforce - ment, conduct audits and post-market surveillance and maintain a public register of high-risk AI systems. Where an offence is committed by a body corporate under the AI Bill, every director or officer who had knowledge of the commission of the offence and did not exercise due diligence to ensure compliance may be found guilty of the offence. This reinforces the expectation that boards must actively engage with AI governance rather than treating it as a purely opera - tional matter. ESG Integration and Sustainability Governance Beyond board–level oversight, ESG integration is accelerating across corporate structures. Issuers are increasingly embedding environmental, social and governance considerations into strategy formulation, enterprise risk management and ethics and compli - ance frameworks. The focus is shifting away from narrative sustainability reporting towards structured, evidence–based integration of ESG factors into core governance systems. This evolution is driven by a combination of investor demand, regulatory direction and convergence with international sustainability standards. The CMA Gov - ernance Code requires listed companies to explain in their annual reports how they have applied the Code’s recommendations, including in relation to ESG mat - ters. The Nairobi Securities Exchange’s ESG Disclo - sures Guidance Manual, issued in late 2021, provides
listed companies with a framework for collecting, ana - lysing and publicly disclosing ESG information aligned with internationally recognised reporting standards. Boards are therefore expected not merely to approve ESG disclosures, but to interrogate ESG performance in areas such as climate risk, human capital manage - ment, supply chain governance and social licence to operate, recognising the material financial and repu - tational implications of ESG outcomes. Protection of Shareholder Rights and Minority Interests Strengthening of shareholder rights in listed companies Shareholder governance in Kenya has gained renewed momentum, reflecting a broader empha - sis on accountability and investor participation. The “Rights of Shareholders” principle improved to a 77.74% leadership rating, driven by tangible enhance - ments in the exercise of shareholder rights in practice. Under the Companies Act, the company’s constitution binds the company and its members to observe its provisions, establishing the relationship as contractual in nature. Annual general meetings are increasingly accessible and transparent, supported by improved notice periods of at least 21 days, clearer documenta - tion and greater opportunities for meaningful share - holder engagement, including through hybrid or virtual meetings, which are now expressly permitted under the Companies Act. In parallel, the POLD Regulations have expanded the range of matters requiring shareholder approval, par - ticularly in respect of governance policies, related– party transactions and director remuneration. Share - holders in publicly traded companies are also subject to disclosure obligations, including notification when they obtain or cease to hold a “notifiable interest” of 3% or more in the shares of a listed company. Com - panies must publish detailed information about their shareholding, including: • quarterly disclosure of persons holding 3% or more shares; • publication in annual reports of shareholder distri - bution and the names of the ten largest sharehold - ers; and
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