LEGAL NoTiCE No. 36 Kenya Subsidiary Legislation, 2016 1523 THE CAPITAL MARKETS ACT (Cap. 485A) IN EXERCISE of the powers conferred by section 12(l) of the Capital Markets Act, the Cabinet Secretary for the National Treasury makes the following Regulations- THE CAPITAL MARKETS (SECURITIES) (PUBLIC OFFERS, LISTING AND DISCLOSURES) (AMENDMENT) REGULATIONS, 2016 1. These Regulations may be cited as the Capital Markets Citation (Securities) (Public Offers, Listing and Disclosures) (Amendment) Regulations, 2016. 2. The Capital Markets (Securities) (Public Offers, Listing No. 60 of 2002. and Disclosures) Regulations, 2002, in these Regulations referred to as "the principal Regulations" are amended in regulation 2 by inserting the following new definitions in proper alphabetical sequence- "executive director" means a member of a board who also serves as a manager of a company; "independent director" means a member of a board of directors who does not have a material or pecuniary relationship with the company or related persons; is compensated through sitting fees or allowances; and does not own shares in the company: Provided that after nine years of continuous service he or she ceases to be an independent director and assumes the position of a non-executive director; "non-executive director" means a member of a board of a company who can own shares in the company but is not part of the management team or affiliated with the company in any way; and is not an employee of the company - 3, The First Schedule to the principal Regulations is amended in the heading "Competence and suitability of directors and management by deleting the words "The issuer must have at least a third of the Board as non-executive directors" appearing in Part A and substituting therefor the words "The issuer shall have a board comprising of executive directors with a majority of non-executive directors and at least one third of the total number being independent directors"; by deleting the words "The issuer must have at least a third
1524. Kenya Subsidiary Legislation, 2016 of the Board as non-executive directors" appearing in Part B and substituting therefor the words "The issuer shall have a board of directors comprising a balance of executive and non-executive members, with a majority of non-executive directors who, together with the independent directors shall comprise at least one third of the total number of board members"; and by deleting the words "The issuer shall have a minimum of five directors, with at least a third of the Board as nonexecutive directors" and substituting therefor the words, "The issuer shall have a board of at least five directors, comprising of executive and non-executive members, with a majority non-executive directors who, together with the independent directors shall comprise at least one third of the total number of board members". 4. The Fifth Schedule to the principal Regulations is amended- by inserting the following new paragraphs immediately after paragraph A.07 "A.08 The board of every issuer shall develop structures in order to- independently verify and safeguard the integrity of financial reporting; and ensure the truthful and factual presentation of the company's financial position. A. 09 The board shall state in the company's annual report it's responsibility for preparing the annual report and accounts, which shall include a statement by the auditor on the auditor's reporting responsibilities." by deleting the Part headed CO.F.00" and substituting therefor the following new Part- CO.F.00 CORPORATE GOVERNANCE F.0 1 (1) Every issuer shall comply with the corporate governance requirements stipulated in this Part. (2) Every issuer shall disclose in its annual report, a statement of the directors as to whether the issuer is applying the recommended corporate governance practices stipulated in the Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015 issued by the Authority: Provided that where the issuer has not fully applied the recommended corporate governance practices, the directors shall indicate the steps being taken to ensure the application of such practices. F.02 (1) Every company shall be headed by a board which shall offer strategic guidance, leadership and control of the company.
Kenya Subsidiary Legislation, 2016 1525 (2) Notwithstanding paragraph (1), the board shall (d) (e) (f) (g) (h) have an appropriate balance of skills, experience, independence and knowledge of the company to enable the board to operate effectively; have transparent and documented procedures for the appointment of successive boards to ensure smooth transition; establish separate functions for itself and the management; establish policies to ensure that directors of the board are independent; develop a Code of Ethics and Conduct and ensure that the Code is complied with; establish, periodically review and publicize the board charter on the company's website; ensure the company complies with all applicable laws and standards; and be accountable to the company's shareholders. (3) A person offering himself for appointment as a director of the board shall disclose any real, potential or perceived conflict of interest that may undermine the office of director. (4) The board of an issuer shall on an annual basis, evaluate its performance, the performance of its chairperson, the chief executive officer and the company secretary. F.03 The board of every issuer shall- establish relevant committees to discharge its mandate including internal audit, risk management, remuneration, board nominations, finance, investments and governance; (d) (e) (f) formulate the terms of reference, duties and authority of each committee; ensure that the committees are constituted with directors who have the necessary skills and expertise to handle the responsibilities allocated to the committees; appoint chairpersons of the committees; determine the procedure and process within which the committees may be allowed to engage independent professional advice at the company's expense;and review the effectiveness and performance of the committees on an annual basis.
1526 Kenya Subsidiary Legislation, 2016 F.04 (1) A nomination committee established pursuant to paragraph F.03 shall consist of at least three independent directors. (2) The chairperson of the nomination committee shall be An independent director. (3) The nomination committee shall- recommend to the board, candidates for the office of director to be considered for appointment by shareholders; assess the performance and effectiveness of the directors of the company. F.05 (1) An audit committee established pursuant to paragraph F.03 shall consist of at least three independent directors. (2) The chairperson of the audit committee shall be an independent director. (3) The board shall ensure that at least one of the members of the audit committee holds a professional qualification in audit or accounting and be in good standing with the applicable professional body. F.06 There shall be public disclosure in respect of any management or business agreements entered into between the issuer and its related companies, which may result in a conflict of interest situation. F.07 (1) Every person except a corporate director who is a director of a public listed company shall not hold such position in more than three public listed companies at any one time and in the case where the corporate director has appointed an alternate director, the appointment of such alternate shall be restricted to two public listed companies: Provided that the public listed company whose directors hold more than the prescribed limit, shall comply with these regulations within six months of gazettement. (2) An executive director of a public listed company shall not hold such position in more than two public listed companies at any one time. F.08 (1) The chairperson of a public listed company shall be independent. (2) A chairperson of a public listed company shall not hold such position in more than two public listed companies at any one time: Provided that the public listed company whose chairperson holds more than the prescribed limit shall comply with these Regulations within six months of gazetternent.
Kenya Subsidiary Legislation, 2016 1527 (3) The roles of chairperson and chief executive officer shall not be exercised by the same person. (4) Every public listed company shall have a succession plan for its chairperson, chief executive office and employees. F.09 (1) The qualification and procedure for nomination and appointment of alternate board directors shall be the same as that required in the appointment of a substantive board director. (2) A principal director whether a body corporate or a natural person shall have only one alternate director. (3) A body corporate shall not be nominated as an alternate director. (4) An alternate director shall not be appointed as a member of the audit committee. F.10 The chief financial officers and persons heading the Cap.531 accounting department of every issuer shall be members of the Institute of Certified Public Accountants established under the Accountants Act. F.1 1 Where the persons referred to in subparagraph F.10 are members of other internationally recognized professional bodies and are yet to register as members of the Institute of Certified Public Accountants, such persons shall register as members of the Institute within a period of twelve months from the date of gazettement of these Regulations, or from the date of appointment to such position, whichever is later. F.12 The board of every issuer shall be assisted by a company Cap.534 secretary who shall be a member of the Institute of Certified Public Secretaries of Kenya established under the Certified Public Secretaries of Kenya Act. F.13 Every issuer shall establish formal and transparent policies and procedures, which shall be approved by shareholders for- (d) (e) remuneration; effective communication with stakeholders; corporate disclosure policies and procedures; dispute resolution for internal and external disputes; and ensuring attraction and retention of board members. F.14 The board of an issuer shall facilitate the effective exercise of the rights of shareholders; ensure that there is equitable treatment of all holders of the same class of issued shares; and
1528 Kenya Subsidiary Legislation, 2016 ensure that the shareholders appoint independent auditors at each Annual General Meeting. F. 15 The board of an issuer shall establish and review on a regular basis, the adequacy and integrity of the company's internal control systems for acquisitions and divestitures and management of information systems including compliance with applicable laws, regulations, rules and guidelines; set out its responsibility for internal control in the board charter; ensure the effectiveness of the company's risk management and internal control practices on an annual basis. F. 16 The auditor of a listed company shall be a member of the Institute of Certified Public Accountants and shall comply with the International Standards of Auditing. The board of an issuer shall protect, enhance and invest in the well-being of the economy, society and the environment. Dated the 23rd December, 2015. HENRY ROTICH, Cabinet Secretaryfor the National Treasury PRINTED AND PUBLISHED BY THE GOVERNMENT PRINTER, NAIROBI