KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha and Brian Muchiri, Cliffe Dekker Hofmeyr (Kieti Law LLP)
panies, imprisonment of up to seven years for indi - viduals, and multiple repayment of trading gains, reflecting the heightened deterrence measures under the regulatory framework. 5.2 Market Practice on Timing The timing of deal disclosure is prescribed by law and is set out in 5.1 Requirement to Disclose a Deal . 5.3 Scope of Due Diligence An acquirer typically carries out due diligence on the target before the acquisition. This is based on all pub - licly available information and information supplied by the target and/or its shareholders. The scope varies depending on factors such as the nature of the target’s business, the structure of the acquisition, whether it is a public takeover, and whether it is a cross-border transaction. It is common for acquirers to conduct due diligence on the following areas: general corpo - rate, material contracts, regulatory compliance and licensing, financial arrangements and borrowings, real estate, material assets, employment, litigation, infor - mation technology and intellectual property rights, and insurance. Increasingly, investors are concerned with sustainable and responsible business practices and therefore the scope of due diligence has been extended to encompass Environmental Social and Governance (ESG) considerations, compliance with anti-money laundering regulations and counter-terror - ism financing. 5.4 Standstills or Exclusivity It is typical for M&A transactions to involve exclusive arrangements, but it is important for parties to ensure that standstill and exclusivity agreements fall within the bounds of Kenyan law as failure to do so could invalidate the transaction and result in a penalty: • the Companies Act permits opt-in resolutions that nullify any agreement that limits the transfer of shares in the target to the acquirer during the offer period, or restricts the transfer of shares to anyone while the acquirer holds more than 75% of the vot - ing shares; and • the Takeover Regulations prohibit the suspension of trading of shares of a listed company during a takeover unless the suspension is necessary to enable the target to disclose information regard -
ing the takeover offer or as directed by the CMA to obtain material information on the offer. 5.5 Definitive Agreements Tender offers for publicly traded companies must be in writing. Furthermore, the takeover press notice should specify the terms of the takeover offer, includ - ing acceptance, listing, and capital increase condi - tions in accordance with the Takeover Regulations. Private companies, on the other hand, are not required to have a definitive agreement in writing, and it can be either oral or written. It is uncommon in most transac - tions to not have definitive agreements in place. 6. Structuring 6.1 Length of Process for Acquisition/Sale There are no set timelines for private M&A transac - tions, and much depends on the parties involved. With respect to public M&A transactions, specific timelines are set out in the Takeover Regulations. • Within 24 hours of the board resolution by the acquirer approving the proposed acquisition, the acquirer is required to serve the notice of intention on the target, CAK, CMA and NSE. • Upon service of the notice of intention, the acquirer must publish a press announcement of the pro - posed offer in two newspapers of national circu - lation. In parallel, the target is required to issue a cautionary announcement in at least two such newspapers, alerting shareholders to the impend - ing takeover. • Within ten days of serving the notice of intention on the listed company, NSE, CMA and the CAK (where applicable), the party making an offer must provide the listed company with a statement of the takeo - ver plan that has been approved by the CMA. • Then, within 14 days of that, it must submit a takeover offer document to the CMA for approval. • The CMA has up to 30 days to approve the takeo - ver offer document, but it can take longer if neces - sary. • Once the takeover offer document is approved, the acquirer has five days to provide the target with
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