Legal Compliance in Kenya: Explore essential steps in mergers and acquisitions to meet regulatory standards. Protect your business! Book Appointment Now!
The need for corporates to expand their global footprint and presence, to access and harness technology and technological advancement, to maximize their scales of production, to inject synergy in operations, to break into new markets, to strategize on profit maximization and to attract, develop and sustain human capital, are some of the factors that inform a company’s decision to either merge with another company or acquire another company.
Section 2 of the Competition Act, Cap 504 Laws of Kenya (hereinafter “the Act”), defines a merger as the acquisition of shares, business or other assets whether inside or outside Kenya resulting in change of control of a business, part of business or an asset of a business in Kenya in any manner and includes a takeover.
Flowing from the definition above, the key ingredient of a merger is the change of control of a business “X”, part of it or its asset which change is brought about by a business “Y.” This change may be effected through for example business Y either purchasing business X’s shares, acquiring a significant interest in business X, purchasing its strategic assets, acquiring a controlling interest or substantially changing the ownership structure of business X.
Ensuring Legal Compliance in Mergers and Acquisitions in Kenya
It is imperative to note that mergers are regulated by the Act. Accordingly, proposed mergers are subject to section 42 (2) of the Act which provides that proposed mergers must be approved by the Competition Authority of Kenya (CAK). Indeed, the Act further provides that the CAK must be notified of proposed mergers in writing and it shall within sixty (60) days make a determination in the following terms:-
- give approval for the implementation of the merger;
- decline to give approval for the implementation of the merger; or
- give approval for the implementation of the merger with conditions.
However, the following types of transactions, despite satisfying the definition of a merger within the meaning of Section 41(1) are not subject to mandatory notification:
- Any acquisition of voting shares where the acquisition is less than 25%, that does not amount to control where the shares are acquired solely for investment purposes or in the ordinary course of business;
- Any acquisition of further voting securities by an undertaking which already holds more than 50% of the shares unless the acquisition is a transfer of joint control to sole control;
- Any acquisition of assets, which meets the mandatory notification thresholds, where the assets in question are those acquired solely as an investment or in the ordinary course of business, not leading to control of the acquired undertaking;
- Any transaction involving parent or holding company and its subsidiary or otherwise already vertically integrated company where the companies previously function as one undertaking operating under prior unified control;
- Any mergers where the combined turnover or assets of the merging parties is between one hundred million shillings and one billion shillings;
- In the healthcare sector, where the combined turnover or assets of the merging parties is between fifty million shillings and five hundred million shillings;
- In the carbon- based mineral sector, if the value of the reserves, the rights and the associated exploration assets to be held as a result of the merger is below four billion shillings; and
- Undertakings in the carbon-based mineral exploration and prospecting sectors.
Essentially, therefore, if your company is currently considering a merger, the abovementioned transactions are excluded. However, it is important to note that mergers and acquisitions are complex legal transactions which as a matter of course, require the best commercial and corporate lawyers in Kenya.
Our team of the best mergers & acquisitions lawyers in Kenya has proven track record in overseeing and successfully completing corporate mergers and acquisitions for our Clients. Our team at F.M Muteti & Company Advocates understand and appreciate the dynamic nature of the present business and corporate world. We further recognize the pivotal role that mergers and acquisitions play in steering corporate growth and presence. Indeed, we are with you every step of the way to zealously advise on and methodically oversee your company’s mergers and acquisitions in Kenya and the region.
Disclaimer: The information provided in this article is provided for information purposes only and does not constitute a legal advisory. We advise prospective Clients to get in touch with us for more comprehensive and contextualized legal advice.
