KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha and Brian Muchiri, Cliffe Dekker Hofmeyr (Kieti Law LLP)
2.5 Labour Law Regulations There are currently no laws in Kenya that regulate the process of transferring employees during an M&A transaction. In 2019, a draft Employment (Amend - ment) Bill was introduced in parliament to provide for the mandatory transfer of employees in the event of a merger. However, the Bill did not progress. Presently, the CAK requires the acquiring party to dis - close its plans for the target company’s employees. Depending on the merging entities’ track record on labour-related matters, public interest, and anticipated efficiencies, the CAK may impose conditions on the acquirer to assume all employment contracts entered into by the target. An illustrative case of this was the proposed sale and purchase of assets of Mombasa Apparel (EPZ) Limited by Nava Apparels L.L.C-FZ where the CAK approved the acquisition on condi - tion that Nava Apparels retain all 4,478 employees of the target company under terms that are at least as favourable as their existing contracts, contingent upon each employee’s acceptance of continued employment under the acquirer’s management. In some newsworthy instances, employees affected by M&A transactions have sought legal action when transactions have had significant effects on their employment. In 2020, the Competition Tribunal in Telkom Kenya Limited v Competition Authority of Kenya stated that public interest should be a signifi - cant consideration to ensure that employees who lose their jobs as a result of an M&A transaction are reab - sorbed in the market. In addition, the High Court in Evans Aseto and Another v National Bank of Kenya and Another was of a similar persuasion. 2.6 National Security Review There is no definite rule mandating security reviews for M&A transactions. Nevertheless, the CAK Con - solidated Guidelines on the Substantive Assessment of Mergers under the Competition Act have created a public interest assessment to evaluate mergers, which promotes transparency and predictability in the process. Moreover, the CAK assesses the impact of mergers on public policy in specific sectors and col - laborates with other government bodies when review - ing merger proposals.
ceeds KES10 billion; or (d) where the firms operate in the COMESA, meet the threshold in point (a) above, and two-thirds or more of their turnover or assets (whichever is higher) is generated or located in Kenya. Excluded Transactions Requiring Approval of the CAK (a) where the combined turnover or assets (which - ever is higher) is between KES500 million and KES1 billion; or (b) if, irrespective of asset value, the firms are engaged in prospecting in the carbon-based mineral sector. Excluded Transactions Not Requiring Approval of the CAK (a) the combined turnover or assets (whichever is higher) does not exceed KES500 million; (b) the merger meets the CCCC merger notifica - tion thresholds and at least two-thirds of the turnover or assets (whichever is higher) is gen - erated or located outside of Kenya; (c) the merger takes place wholly or entirely out - side of Kenya and has no local nexus; or (d) the merger involves a holding company and its subsidiary wholly owned by undertakings belonging to the same group or amalgamations involving subsidiaries wholly owned by under - takings belonging to the same group. It is useful to note that there is no need to seek approval from the CAK for transactions that meet the notification thresholds of the CCCC (unless two-thirds or more of the firms’ turnover or assets (whichever is higher) is generated or located in Kenya). The parties in this regard are required to notify the CAK of the CCCC merger filing within 14 days of the CCCC filing. When assessing the merger notification, the CAK applies a two-fold test as follows: • competition assessment – the effect of the pro - posed merger on competition; and • public interest assessment – the proposed merg - er’s effect on public interest concerns, such as opportunities for small businesses and loss of employment.
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