Governing Law

Mergers in Kenya are regulated by the Competition Act, 2010. The body entrusted with the enforcement of the Act is the Competition Authority of Kenya. The Act defines a merger “as an acquisition of shares, business or other assets, whether inside or outside Kenya, resulting in the change of control of a business, part of a business or an asset of a business in Kenya in any manner and includes a takeover.”

Approval

Section 42(2) of the Act requires that mergers should give a notification and seek approval from CAK for them to be valid. Section 42(1) however gives CAK the mandate to exempt from meeting the requirements of Part (IV) of the Act. The Authority has gone ahead to establish threshold guidelines to be exempted from the provisions of Part (IV) of the Act.

The following mergers are not exempted from the provisions of Part IV of the Act:

  1. undertakings that have a minimum combined turnover or assets of 1 billion Kenya shillings and the turnover of the target undertaking is above 100 million Kenya shillings;
  2. undertakings in the healthcare sector, where the undertakings have a minimum combined turnover or assets of 500 million Kenya shillings and the turnover of the target undertaking is above 50 million Kenya shillings;
  3. undertakings 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 exceeds 4 billion Kenya shillings; and
  4. undertakings in the oil sector, where the merger involves pipelines and pipeline systems that receive oil and gas from processing fields belonging to and passing through the meters of the target undertaking, even where the value of the reserves is below 4 billion Kenya shillings.

The following mergers however are exempted from the requirements of Part IV of the Act:

  1. any mergers where the combined turnover or assets of the merging parties is between 100 million and 1 billion Kenya shillings;
  2. any mergers in the healthcare sector where the combined turnover or assets of the merging parties is between 50 million and 500 million Kenya shillings;
  3. any mergers 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 4 billion Kenya shillings;
  4. any mergers in the carbon-based mineral exploration and prospecting sector;
  5. any acquisition of voting shares where the acquisition is less than 20 per cent, that does not amount to acquisition of direct or indirect control where the shares are acquired solely for investment purposes or in the ordinary course of business;
  6. any acquisition of further voting securities by an undertaking that already holds more than 50 per cent of the shares, unless the acquisition is a transfer of joint control to sole control; and
  7. any acquisition of assets that meet the merger 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.

In all the situations however, it is required of the proprietors of the Merger to make an application to CAK. The authority then has the power to determine whether a merger is exempted from the provisions of Part IV of the Act. The only form of merger that is exempted from making an application to the authority it is when it involves restructuring or reorganization of companies within the same group.

The following however are exempted from the definition of mergers.:

  1. A joint venture that is not full-function
  2. Appointment of a receiver or an administrator that or an entry into an agreement with the creditors that does not amount to control
  3. Solely as an investment or in the ordinary course of business in so far as the total shares or voting rights held by the acquiring undertaking directly or indirectly, does not entitle the acquiring undertaking to hold twenty per cent (20%) or more of the total shares or voting rights of the company, not leading to acquisition of control of the undertaking whose shares or voting rights are being acquired
  4. is in the circumstance of the acquiring undertaking, prior to acquisition, already controlling fifty percent plus one (50%+ 1) or more shares or voting rights in the undertaking whose shares or voting rights are being acquired, except in the cases where the transaction results in transfer from joint control to sole control;
  5. not directly related to the business activity of the party acquiring the asset or made solely as an investment or in the ordinary course of business, not leading to control of the undertaking whose assets are being acquired; except where the assets being acquired represent substantial business operations in a particular location or for a particular product or service of the undertaking, of which assets are being acquired and do not comprise a business with a market presence to which a market turnover can be clearly attributed, irrespective of whether such assets are organized as a separate legal entity or not;
  6. pursuant to a bonus issue, stock splits or consolidation of face value of shares, buy back of shares, subscription to, or renunciation of rights in a rights issue of shares, not leading to acquisition of control; or
  7. of stock-in-trade, raw materials, stores and spares in the ordinary course of business.

Abraham Owiti

3 Comments

  1. admin
    September 16, 2019

    Dis lacinia pellentesque interdum tincidunt cubilia massa egestas primis ullamcorpert ultricies, ad molestie dui in feugiat lobortis erat vivamus hac condimentum est,

    • admin
      September 16, 2019

      Dis lacinia pellentesque interdum tincidunt cubilia massa egestas ullamcorpert ultricies, ad molestie dui in feugiat lobortis erat vivamus.

  2. admin
    September 16, 2019

    Dis lacinia pellentesque interdum tincidunt cubilia massa egestas primis ullamcorpert ultricies, ad molestie dui in feugiat lobortis erat vivamus hac condimentum.

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