This morning, a session was held by the law firm of Anjarwalla & Khanna in Nairobi to advise stakeholders abount the new Companies Act and Insolvency Act that are now law.
The Cabinet Secretary for Industrialisation, Adan Mohamed, said that the day when President Uhuru Kenyatta signed 4 bills into law - the companies act, insolvency act, special economic zones act and business registration act - was his proudest day in two years in the Cabinet.
Partners at the law firm explained various sections of the new companies act including:
- It makes businesses easy to register and operate - and one person can form a company.
- Memo (can be one page long) & articles are simpler
- Role of the company secretary has been clarified. Corporate governance has been clarified with penalties for directors and management including for conflict of interest.
- 30% local shareholding in a foreign company. Adan said this was a mistake that the government would rectify. The team from Anjarwalla & Khanna said that while the 30% rule is probably constitutional it's impractical, and the AG & government agree. They also explained that it is for new branches only - and does not apply to existing branches, or to any subsidiaries of foreign companies
- It gives minority shareholders court powers if main shareholder/management are prejudicial or make bad decisions / transactions on behalf of the company
- New company is able to do anything including borrow unless if it restricted
- PE Investor oversight: Investors can attend board meetings as observers and without being directors or legally bound by decisions
- A company must have at least one natural person as a director (all companies have 6 months to rectify this)
- Companies can buy back shares from other shareholders
- Kshs. 6.75 million (~$67,500) is the minimum paid-up share capital for a public company (this will affect some land owning companies and large property developers)
- Public companies need to know who beneficially owns their shares (the true owners behind proxies)
- Companies are required to have websites and to publish financial statements online
- Share buy backs are now allowed.
- All shareholders have rights to preemption when companies create new shares - (and this can only be from profits, not new money)
- MBO and LBO:'s banks could not finance acquisitions, but now they can. e.g. Management can to a bank and use the assets of the company secure financing to buy it or pay off foreign outgoing shareholders - (this opens another exit opportunity for investors)
Adan also said that the insolvency law, which previously was aimed on recoveries for secured creditors, is now focused on bringing insolvent companies back to life.