KENYA Law and Practice Contributed by: Sammy Ndolo, Brian Muchiri, Damaris Muia and Nicole Gacheche, Kieti Law LLP
in that financial year in the notes to the com - pany’s individual financial statement. The directors of a listed company shall prepare a directors’ remuneration report for each financial year. A quoted company is one whose equity share capital has been included in the official list on a stock exchange or other regulated market in Kenya. 5. Shareholders 5.1 Relationship Between Companies and Shareholders Individuals become members of a company by subscribing to shares on: • incorporation; • the creation of new shares; or • through a transfer of shares from an existing shareholder. Shareholders provide equity or financial backing to a company and are generally liable only for the amount of their unpaid shares. The Companies Act provides that a company’s constitution binds the company and its mem - bers to the same extent as if the company and its members had covenanted with each other to observe the constitution, making the relationship contractual in nature. The company’s constitution (articles of asso - ciation) governs the relationship between the company and its members, including the rights attached to the respective members’ shares. In some cases, members may opt to enter into a private shareholders agreement to govern the relationship amongst themselves.
Generally, a company is a separate legal entity from its shareholders. This separate personal - ity is not without limits, and courts may allow piercing the corporate veil in cases of fraud and serious misconduct. The concept of piercing the corporate veil is recognised under Kenyan law, and courts will do so if satisfied that there has been serious misconduct or fraud. In doing so, the individuals behind the company who have committed a wrong using the company will be held personally liable. The Companies Act requires a company to main - tain a register of its shareholders, including their names, addresses, shareholding details, dates of becoming and ceasing to be shareholders, and any distinctions between classes of shares. The register must be kept at the company’s reg - istered office, and a copy must be submitted to the Registrar of Companies. Although the Com - panies Act does not expressly provide for public access to this information, certain shareholder details may be obtainable through a formal search at the Companies Registry, subject to the applicable fees, including the shareholders’ names, addresses, and shareholding details. 5.2 Role of Shareholders in Company Management Shareholders are not involved in the company’s day-to-day running, as this is a function of the board of directors. Shareholders, however, have the power to appoint and remove directors from office. In addition, certain decisions, such as loans by a company to its directors, may only be made with shareholders’ approval. 5.3 Shareholder Meetings Every company must hold an annual general meeting within a year. Failure to do so can result in a fine of up to KES100,000 (approximately USD775).
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