KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha and Brian Muchiri, Cliffe Dekker Hofmeyr (Kieti Law LLP)
5. Negotiation Phase 5.1 Requirement to Disclose a Deal Private companies are under no obligation to disclose a deal; hence, most bids remain private. On the other hand, for listed companies, an acquirer who intends to acquire effective control in a listed company is under a duty to announce its proposed offer through a press notice and serve a written notice of intention to the listed company, NSE and CMA with - in 24 hours from the resolution of its board to acquire effective control of the listed company. Where the acquirer is engaged in the same business as the listed company, it will be required to service the notice of intention to the CAK. Subsequently, the acquirer is to serve the listed company within ten days of the date of notice of intention with its statement of the takeo - ver scheme, which cannot be amended or withdrawn without the prior written consent of the CMA. The listed company’s disclosure obligation kicks in after receiving the acquirer’s statement of the takeover plan. The listed company is obliged to inform the NSE and the CMA and announce the proposed takeover within 24 hours of receipt of the acquirer’s statement. In parallel, Kenya’s insider trading and market abuse regime plays a critical role in shaping the timing and manner of disclosures in takeover transactions. Once negotiations or intentions relating to a listed company constitute material non-public information, the parties involved including the acquirer, the target, their direc - tors, senior management and advisers are restricted from dealing in the listed company’s securities until the information is publicly disclosed. In practice, this creates strong regulatory pressure for early and accu - rate announcements, as prolonged confidentiality in the face of price-sensitive information increases insid - er trading risk and regulatory exposure. Insider trading breaches attract criminal sanctions. For first-time offenders, penalties include fines of up to KES2.5 million for individuals and up to KES5 mil - lion for companies, imprisonment of up to two years, and mandatory disgorgement of illicit trading gains. For repeat offenders, the sanctions are significantly enhanced, with fines of up to KES10 million for com -
4.5 Filing/Reporting Obligations The Capital Markets (Derivatives Markets) Regula - tions, 2015 require derivatives exchanges to retain and preserve all books, registers, minutes of the board and other documents for not less than seven years. In addition, derivative exchanges must disclose the shareholding pattern of the exchange every quar - ter within 15 days from the end of each quarter to the CMA, which should outline the names of the ten largest shareholders together with the percentage of shares held, the names of the Kenyan sharehold- ers holding at least 15% of the paid-up equity share capital, and the names of the individual or corporate person controlling more than 25% of the issued share capital or entitled to appoint more than 25% of the board or receive 25% of the aggregate dividends to be paid. 4.6 Transparency The Takeover Regulations provide that an acquirer who wishes to take over a listed company must sub - mit to the CMA the takeover offer document, which shall contain information on the acquirer’s intentions regarding the continuation of the business of the list - ed company. The acquirer is further required to state intentions regarding major changes to be introduced in the business, intentions regarding strengthening the financial position of the listed company, if such plans include merger, liquidation, selling assets or redeploy - ing fixed assets or any major changes in the struc - ture of the listed company or its subsidiaries. Where there are long term commercial justifications for the proposed take-over offer, these should be disclosed together with any intentions regarding the continued employment of the employees of the listed company. Further, the Takeover Regulations require an acquirer to confirm in the takeover offer document whether any shares acquired pursuant to the take-over offer will be transferred within a foreseeable period from the date of the offer document to any other person, together with the names of the parties to any such arrangement. In the case where a shareholder has acquired effec - tive control in a listed company but has no intention of making a takeover offer, it is required to seek an exemption from the conditions imposed by the CMA.
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