KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha and Brian Muchiri, Cliffe Dekker Hofmeyr (Kieti Law LLP)
It should be noted that these registers are not open to inspection by members of the public. The Capital Markets (Licensing Requirements) (Gener - al) Regulations, 2002 (“Licensing Regulations”) speci - fy that any person who acquires a “notifiable interest” (ie, 3% or more) in shares of a listed company or who ceases to be interested in such shares, must notify the listed company of the acquisition or cessation of interest in the shares. The Licensing Regulations also require that listed companies report to the NSE on a monthly basis: • all persons who have acquired or ceased to have a notifiable interest in its shares; • all directors holding 1% or more in the relevant share capital; and • cumulative holding of the relevant share capital by directors. The Capital Markets (Public Offers, Listings and Dis - closures) Regulations, 2023 require several types of shareholding disclosures, including: • monthly disclosure to the NSE of every person who holds or acquires 3% or more of the listed com - pany’s ordinary shares in the case of a company listed on the Main Investment Market Segment or 5% or more of the company’s ordinary shares in case of a company listed on the Small and Medium Enterprises Market Segment; • publication by a listed company, in its annual report of: (a) distribution of shareholders; and (b) names of the ten largest shareholders and the number of shares in which they have an inter - est as shown in the issuer’s register of mem - bers. 4.3 Hurdles to Stakebuilding It is possible for a company to introduce higher report - ing thresholds in its articles of association; however, it is not possible to introduce reporting thresholds that are lower than those prescribed in the existing legis - lation. Certain hurdles would limit stakebuilding in Kenya. Typically, shareholders are entitled to pre-emption
rights under the company’s articles of association and as such, a shareholder wishing to build up its stake in a company would require the consent of the board of directors and existing shareholders. There are also several statutory hurdles to stakebuild - ing. Under the Takeover Regulations, a person can be assumed to have a strong intention to take over a listed company if they meet the criteria discussed in 4.1 Principal Stakebuilding Strategies . In addition, the Takeover Regulations impose restrictions that pro - hibit the issuance of 25% or more of the share capital of a subsidiary of a listed company, or 10% or more of the share capital of a subsidiary that has contributed to 25% or more of the average turnover in the last three financial years of a listed company without full disclosure to the shareholders of the listed company. Certain sectors have specific limitations, such as the CBK, which prohibits the acquisition of more than 5% of the share capital in a banking or financial institution without its prior approval. Similarly, the CA requires prior approval for any changes in ownership, control, or proportion of shares held in a company licensed by CA. Any change in shareholding of a CA licensee exceeding 15% of the issued share capital or the acquisition of at least 5% additional shares by an existing shareholder must be notified to the CA for its approval. In insurance, the acquisition, transfer or dis - posal of more than 10% of the paid-up share capital or voting rights of an insurer requires the prior written approval of the commissioner of insurance. 4.4 Dealings in Derivatives Transactions involving derivatives are allowed, and such activities are governed by the Capital Markets (Derivatives Markets) Regulations, 2015. These regu - lations establish guidelines for participants in order to promote transparency and stability within the market. The trading of derivatives is also made easier through NEXT, which is a derivative market on the NSE, regu - lated by the CMA. To regulate derivative markets, a number of rules have been developed, including the NSE Derivative Rules, NSE Derivatives Investor Pro - tection Fund Rules, and NSE Derivatives Settlement Guarantee Fund Rules.
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