KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha and Brian Muchiri, Cliffe Dekker Hofmeyr (Kieti Law LLP)
7.3 Producing Financial Statements The Takeover Regulations require bidders to disclose their financial statements when disclosing a bid. The acquirer’s offer statement is required to summarise the latest audited financial statements including: • balance sheet; • income statement; • statement of the changes in equity; • cash flow statement; and • earnings per share (prior to the takeover offer and post takeover). Further, as stated in 7.2 Type of Disclosure Required , applicants to the CAK are required to disclose audited financial statements for the last three years. Financial reporting in Kenya is governed by the Inter - national Financial Reporting Standards (IFRS). These standards are mandated by (i) CBK, which published guidelines on the implementations of IFRS on finan - cial statements; and (ii) the Institute of Certified Public Accountants of Kenya (ICPAK), which has stipulated that financial statements must comply with IFRS or IFRS for Small and Medium Enterprises (IFRS for SMEs). 7.4 Transaction Documents As noted in 7.2 Type of Disclosure Required , the Takeover Regulations outline that parties must dis - close details of any existing or proposed agreement, arrangement or understanding relating to voting shares to which the takeover relates. Further, the CAK requires transaction documents to be submitted along with the notification/application (as applicable) for purposes of analysing the terms and conditions of the bid to determine whether control is being effectively transferred to the acquirer and the impact of the acquisition on competition. The same applies to other competition authorities such as the CCCC and EACCA. In addition, if an acquisition is being undertaken in a regulated industry such as the financial industry, energy industry or insurance industry, the regulators (such as the CBK, EPRA and the IRA) may require
the applicants to lodge the transaction documents for purposes of regulatory approvals.
8. Duties of Directors 8.1 Principal Directors’ Duties
The Companies Act codified the duties of a direc - tor which were established under common law. The duties are also provided for in the CMA Governance Code, with respect to listed companies. In summary both the Companies Act and the CMA Governance Code require a director to: • act within their powers; • promote the success of the company; • exercise independent judgement; • exercise reasonable care, skill and diligence; • avoid conflict of interest; and • not accept benefits from third parties. In the context of a takeover of a listed company, the directors are under an obligation not to frustrate the offer for instance by issuing any of its authorised but un-issued shares, selling any of the listed company’s assets or those of its subsidiary or entering into any contracts otherwise than in the ordinary course of the company’s business. In general, a director’s duty is to the company, ie, the company shareholders. However, the duties of a director can be interpreted to apply to other stake - holders of the company such as regulators, employ - ees, suppliers and customers. Furthermore, other legislation such as the Insolvency Act, 2015 requires directors to act in the interests of other stakeholders of the company such as the credi - tors, when the company is undergoing an insolvency process. It is also important to note that the emergence of ESG will force directors to owe their duties both to the stakeholders and company shareholders instead of solely the company’s shareholders. In the case of listed companies, the NSE has issued the ESG Disclo - sures Guidance Manual, which provides listed com -
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