KENYA Law and Practice Contributed by: Sammy Ndolo, Njeri Wagacha, Brian Muchiri and Deborah Sese, Cliffe Dekker Hofmeyr
Security Measures With respect to listed companies, the Takeover Regu - lations do not forbid the implementation of measures to ensure the safety of a deal. However, it is a require - ment for such measures to be revealed in both the takeover offer document and the notice of intention. Common deal security measures include exclusiv - ity, break fees and non-solicitation provisions. These deal security measures are also employable by private companies. 7.6 Acquiring Less Than 100% Additional Governance Rights If a bidder does not seek 100% ownership of the tar - get, the bidder may seek additional governance rights, which are typically included in the shareholder agree - ments or a similar agreement governing shareholder relationships, related to certain transactions such as private equity transactions. In cases where the buy - er does not want full ownership, the buyer usually requests governance rights, such as the right to have representation on the target company’s board and the power to veto certain decisions. When it comes to public M&A transactions, the CMA’s Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 (the “CMA Govern - ance Code”), requires companies to treat all share - holders fairly, including minority and foreign share - holders. Companies are also required to fully disclose any non-compliance, and while satisfactory explana - tions may be considered, the mandatory provisions of the Disclosures Regulations must be followed in the The Business Laws (Amendment) Act 2020 amended the Takeover Regulations to allow the purchaser to squeeze out dissenting shareholders where the pur - chaser acquires 90% of the share capital of the target. Under the Takeover Regulations, if an acquirer pur - chases 90% of a target company’s voting shares, they must make an offer to the remaining shareholders to buy their shares at a price higher than the current market value. Although the acquirer has the right to acquire the remaining shares, minority shareholders can challenge this process by appealing to the court. CMA Governance Code. Squeeze-Out Mechanism
In addition, notices must be given for three months starting from the day after the offer period ends or six
months from the date of the offer. 7.7 Irrevocable Commitments
Usually, it is standard practice to obtain a firm agree - ment from both major shareholders and all sharehold - ers in general before revealing any plans to make an offer. However, if there are any agreements related to voting, they must be disclosed in the takeover docu - ments. For instance, after a target company’s initial public offering, the target company may require cur - rent shareholders to promise not to sell their shares for a period of 24 months. 8. Management Incentives 8.1 Equity Incentivisation and Ownership Equity incentive plans are commonly used in private equity investments in Kenya. Share option plans are most frequently implemented for management and/ or the founders. The option pool is typically around between 5% and 10% of the share capital of the target company. 8.2 Management Participation Management participation is typically structured in accordance with an employee stock ownership plan (ESOP), allowing management to exercise their right to acquire shares at a fixed price – which is typically lower than the market value of the shares. ESOPs are typically structured as trusts and set out the vesting Equity incentive schemes such as ESOPS, as outlined in 8.2 Management Participation , provide managers with vesting provisions and therefore payment on exit. Leaver Provisions These provisions are stipulated for shareholders who hold managerial positions within the target company. The typical leaver provisions include: • good-leaver provisions – where the manager is permitted to maintain their equity within the target criteria for the shares in the plan. 8.3 Vesting/Leaver Provisions Vesting Provisions
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