More Kenyan Firms Now at Risk of Forceful Takeover

Staff Writer | Oct 30, 2019

New legislation could now make it easier for majority shareholders to forcefully acquire shares held by minority investors. The Statute Law Miscellaneous Amendments) Act No. 12 of 2019 has lowered the compulsory takeover threshold of majority shareholders from 90% to 50%.

Even though this new law affects both publicly traded and private firms, the greatest impact will be felt by the listed firms and Nairobi Securities Exchange (NSE) since it makes it easier for majority owners to take over forcefully.

The new legislation has been widely criticized for reducing investor protections, especially those that make up the minority.

In a statement, Coulson Harney LLC termed the law as bizarre, noting that few, if any, global jurisdictions have this low a threshold for compulsory acquisition. As it stands, a possible third of firms listed in the NSE could be taken over and possibly delisted, a blow to the NSE which has been grappling with a lack of new listings.

Some of the companies which could be affected by the lowered threshold include Express Kenya, Unga, WPP Scangroup, Stanbic Holdings, EABL, Barclays Bank of Kenya, Total Kenya and BAT Kenya because their top shareholders hold close to or more than 50% of the companies.

The Capital Markets Authority is yet to comment on the issue.

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