KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha and Brian Muchiri, Cliffe Dekker Hofmeyr (Kieti Law LLP)
of such a clause may be litigated from a contractual perspective.
believed that they were acting in the company’s best interests. • The duty to avoid a situation in which the director has, or can have, a direct or indirect interest that conflicts, or may conflict, with the interests of the company. • The duty to promote the success of the company for the benefit of its shareholders as a whole. “Suc - cess” in this context will usually mean long-term increase in value of the company, although what constitutes such success is a matter for the direc - tors’ good faith judgement. As noted in 8.1 Principal Directors’ Duties directors of the listed company should not frustrate the takeover. 9.5 Directors’ Ability to “Just Say No” Directors cannot “just say no” and take action that prevents a business combination. Under the Takeover Regulations, once the listed company has served with the notice of intention to make a takeover offer, the directors are prohibited from taking actions that would frustrate or prevent the offer. Directors have a duty to act in the best interest of the company, to exercise independent judgement, and to exercise reasonable care, skill and diligence. Further, they have a duty to promote the success of the company, considering both long-term value and the interests of all shareholders. In essence, directors should have regard to the interests of the company by first considering the bid before deciding on how to proceed. Although litigation is generally uncommon in M&A transactions, there has been an increase of arbitra - tion disputes arising from M&A deals. The disputes commonly revolve around the due diligence and dis - closure process, whereby a party claims that proper disclosure was not made in the due diligence process. Further, there has also been a rise in disputes in relation to employee claims, particularly in transac - tions involving restructurings or redundancies. It has 10. Litigation 10.1 Frequency of Litigation
9. Defensive Measures 9.1 Hostile Tender Offers
The Takeover Regulations do not contemplate nor prohibit hostile tender takeovers, ie, there is no pro - cess/procedure provided to guide how hostile tender offers should be undertaken. Notwithstanding, hostile tender offers are not common in Kenya. 9.2 Directors’ Use of Defensive Measures Directors of a listed company are prohibited by the Takeover Regulations from employing certain tactics to defend against takeovers. These include: • creating or issuing or permitting the creation or subscription of any shares of the listed company; • issuing or granting options in respect of any unis - sued shares of the listed company; • selling, disposing of or acquiring or agreeing to sell, dispose of or acquire any assets of the listed company or of any of its subsidiaries; or • entering into or allowing contracts for or on behalf of the listed company to be entered into otherwise than in the ordinary course of business of the listed company. 9.3 Common Defensive Measures There is no commonly used defence measure in the market, as hostile takeovers are not common in the Kenyan jurisdiction, as noted in 9.1 Hostile Tender Offers . 9.4 Directors’ Duties The duties as provided in the Companies Act continue during the pendency of the director’s tenure. However, in a takeover bid the most relevant duties are as fol- lows. • The duty to act within a director’s powers as the directors must only exercise the powers vested in them by the company’s constitution for the pur - poses for which the powers were conferred. Direc - tors’ powers must not be exercised for any other purpose, even if the directors may have honestly
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