Minority shareholders in firms registered in Kenya can breathe a sigh of relief following the signing into law of the Business Laws (Amendment) Bill, 2019. The Amendment act lifts the threshold for compulsory acquisition/sell-out rights for company shareholders involved in a take-over from 50% to 90%.
Therefore, for companies listed at the Nairobi Securities Exchange, the new law will ensure the protection of minority shareholders.
Right of the offer to buy out minority shareholders
Compulsory acquisition right – An offeror who has, as a result of the acceptance of the offer, acquired or unconditionally contracted to acquire — (a) not less than ninety per cent in value of the shares to which the offer relates; and (b) if the shares to which the offer relates are voting shares—not less than ninety per cent of the voting rights conferred by those shares, may give notice to the holder of any shares to which the offer relates that the offeror has not acquired or unconditionally contracted to acquire that the offeror intends to acquire those shares.
The law had been amended in 2019 lowering the threshold from 90% to 50% attracting backlash from investors and analysts. The lower threshold allowed any bidder to force out any non-assenting shareholders easily if 50% of the shares to which the offer relates accept the offer.