KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Deborah Sese, Cliffe Dekker Hofmeyr
• all directors holding 1% or more in the relevant share capital; and • the cumulative holdings of the relevant share capi - tal of directors. Private equity-backed bidders need to be aware that this requirement under the Licensing Regulations solely applies to public companies in public transac - tions. However, a similar obligation is applicable to pri - vate companies with respect to beneficial ownership, as discussed in 2.1 Impact of Legal Developments on Funds and Transactions . Further, the Capital Markets (Securities) (Public Offers, Listing, and Disclosures) Regulations, 2002 require several types of disclosures, including: • a quarterly disclosure to the NSE of every person who holds or acquires 3% or more of the listed company’s ordinary shares; • publication by a listed company, in its annual report, of (i) the distribution of shareholders and (ii) the names of the ten largest shareholders – and the number of shares in which they have an interest, as shown in the issuer’s register of members; • immediate disclosure by an issuer of any informa - tion likely to have a material effect on market activ - ity; and • disclosure, in the annual report, of any substantial sale of assets involving 25% or more of the total assets. 7.3 Mandatory Offer Thresholds The Takeover Regulations, as described in detail in 3.1 Primary Regulators and Regulatory Issues , prescribe that an entity is presumed to have a firm intention to take over a public company if the entity acquires a company that holds “effective control” in a public company or, together with the shares already held by associated persons or related companies or persons acting in concert, will result in “[the acquisition of] effective control” of the listed company. The threshold for “effective control” is control of 25% of the shares in a public company. The Takeover Regulations also prescribe circumstanc - es under which a person is presumed to have a firm intention to make a takeover bid, namely:
• the acquirer holds more than 25% of the shares, but less than 50% of the voting rights, and acquires more than 5% of the voting rights in the company; • the acquirer holds at least 50% of the voting shares and acquires additional voting shares, or directly or indirectly acquires a company with effective control of a listed company; and • the acquirer obtains at least 25% of a subsidiary that has contributed at least 50% of the general turnover of the company in the previous three financial years. 7.4 Consideration Both payment in cash and by way of shares is accept - able in Kenya. With respect to public companies, the Takeover Regulations provide that the mode of pay - ment would need to be set out in the takeover offer document. 7.5 Conditions in Takeovers Use of Conditions The Takeover Regulations and the CMA do not limit the use of offer conditions in takeovers. It is com - mon for conditions to be imposed in a takeover with respect to the minimum number of issued voting shares of the listed company, the mode of payment, regulatory approvals and the maintenance of a mini - mum percentage of shareholding by the general pub - lic in order to satisfy the continuing eligibility require - ments for listing. However, the Takeover Regulations do require the conditions to be clearly indicated in the takeover offer document and the notice of intention. Under the Takeover Regulations, an acquirer is not allowed to announce an intention to make an offer if there are no reasonable grounds to believe that the acquirer will be able to fulfil their obligations once the offer is accepted. The acquirer is also required to demonstrate to their financial adviser that they have sufficient funds to ensure the takeover offer will not fail. Additionally, when presenting the offer document, the acquirer must include a statement that assures all shareholders who wish to accept the offer that the acquirer has sufficient funds to complete the takeo - ver and that they will be paid in full; therefore, a ten - der offer cannot be conditional on a bidder obtaining financing.
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