The Capital Markets (Take-Overs and Mergers) Regulations

Section 1. Citation Section These Regulations may be cited as the Capital Markets (Take-overs and Mergers) Regulations and shall be deemed to have come into operation on the 24th July, 2002.

Section 2. Interpretation Section the first closing date of the take-over-offer; or

Section 3. Acquiring effective control Section 3(1) No person shall make an offer to acquire shares or voting rights of a listed company which together with shares or voting rights if any held by such person or by persons acting in concert or by associated person or related company entitle such person to exercise effective control in the listed company without complying with the take-over procedure provided for under regulation 4. Section 3(2)(a) holds more than twenty five percent but less than fifty percent of the voting shares of a listed company, and who acquires in any one year more than five percent of the voting shares of such company; or Section 3(2)(b) holds fifty percent or more of the voting shares of the listed company and who acquires additional voting shares in the listed company; or Section 3(2)(c) acquires a company that holds effective control in the listed company or together with the shares already held by associated persons or related company or persons acting in concert with such person, will result in acquiring effective control of the listed company; or Section 3(2)(d) acquires any shareholding of twenty five percent or more in a subsidiary of a listed compan...

Section 4. Take-over notice and statement Section 4(1)(a) proposed offeree at its registered office; Section 4(1)(b) securities exchange at which the offeree's voting shares are listed; Section 4(1)(c) Authority; and Section 4(1)(d) the Commissioner of Monopolies and Prices appointed under the Restrictive Trade, Practices, Monopolies and Price Control Act ( Cap. 504 ) where the offeror is engaged in the same business as the offeree. Section 4(2)(a) be made in at least two English language dailies of national circulation; Section 4(2)(b) be made after the notice of intention has been served on the proposed offeree; Section 4(2)(c) state that the person intends to acquire or has acquired effective control in the company and has at a stated date served a notice of intention to make a take-over offer to the company or has made an application to the Authority for exemption from the take-over requirements, in compliance with these Regulations; and Section 4(2)(d) the identity of the proposed offeror and all companies related to or persons associated or acting in concert with the proposed offeror; Section 4(2)(d)(i) the identity of the proposed offeror and all companies related to or pers...

Section 5. Exemptions Section 5(1) Subject to this regulation, the Authority may in writing grant an exemption from complying with the provisions of regulation 4 to any particular person or take-over offer or to any particular class, category, description of persons or take-over offers subject to such conditions as may be imposed by the Authority. Section 5(2)(a) an acquisition for the purpose of a strategic investment in a listed company that is tied up with management or any other technical support relevant to the business of such company; Section 5(2)(b) a management buy-out involving a majority of the employees of the offeree; Section 5(2)(c) a restructuring of the listed company's share capital including acquisition, amalgamation and any other scheme approved by the Authority; Section 5(2)(d) an acquisition of a listed company in financial distress; Section 5(2)(e) an acquisition of effective control arising out of disposal of pledged securities; Section 5(2)(f) the maintenance of domestic shareholding for strategic reason(s); and Section 5(2)(g) any other circumstances which in the opinion of the Authority serves public interest. Section 5(3)(a) twenty five percent or more of...

Section 6. Offeree's obligation Section 6(1) Upon receiving the offeror's statement in accordance with regulation 4(4) the offeree shall inform the relevant securities exchange and the Authority and make an announcement by a press notice of the proposed take-over offer within twenty four hours of receipt of the offeror's statement. Section 6(2) The press notice referred to in paragraph (1) shall be made in at least two English language dailies of national circulation and shall include all material information contained in the offeror's statement.

Section 7. Take-over offer Section 7(1) The offeror shall within fourteen days from the date of serving the offeror's statement pursuant to regulation 4(4) submit to the Authority, for approval, the take-over offer document in relation to the take-over offer which shall include the information contained in the Second Schedule and such other information that the Authority may require. Section 7(2) The Authority shall approve the take-over offer document within thirty days where the document is in compliance with the requirements of these Regulations or within such other time as may be determined by the Authority provided that where the Authority has determined it is not possible to grant approval within thirty days, it shall advice the offeror of this fact. Section 7(3) The take-over offer document approved by the Authority shall include a statement in the following words— "Approval has been obtained from the Capital Markets Authority for the compliance with the requirements relating to the take-over offer document under the Capital Markets (Take-overs and Mergers) Regulations, 2002. As a matter of policy, the Capital Markets Authority assumes no responsibility for the correctness o...

Section 8. Requirements for take-over offer Section 8(1) The take-over offer shall be dated and shall unless varied under regulation 16, state that it will remain open for acceptance by the offeree for thirty days from the date of service of the take-over offer document by the offeror. Section 8(2) The offer shall not be conditional upon the offeree approving or consenting to any payment or other benefit being made or being given to any director of the offeree or to any other person that is deemed to be related to the offeree, as compensation for loss of office or as consideration for, or in connection with, his retirement from the office. Section 8(3)(a) whether the offer is conditional upon acceptance of the offer under the take-over scheme, being received in respect of a minimum number of issued voting shares of the offeree and if so, the percentage; Section 8(3)(b) where the shares are to be acquired in whole or in part for cash, the period within which payment will be made and the method of such payment; Section 8(3)(c) where the shares are to be acquired through a share swap, the proportion of the share swap and the period within which the offeree's shareholders shall receive...

Section 9. Offeree comments on the statement and take-over offer Section 9(1) Subject to the independent advice required under regulation 10 the Board of directors of the offeree shall within fourteen days after the receipt of the take-over offer document under regulation 7 issue a circular to the holders of voting shares in the offeree to which the take-over offer relates, indicating whether or not the board of directors of the offeree recommend to holders of the voting shares the acceptance of the take-over offer(s) made by the offeror under the take-over scheme. Section 9(2) The circular referred to in paragraph (1) shall include the information contained in the Third Schedule. Section 9(3) The board of directors of the offeree shall disclose in the circular referred to in paragraph (1) to every holder of the voting rights to which the take-over offer relates all such information as the holders of such voting shares and their professional advisers would reasonably require or expect to find in such a circular or for the purpose of making an informed assessment as to the merits of accepting or rejecting the take-over offer and the extent of the risks involved in such action. Secti...

Section 10. Independent adviser Section 10(1) The board of directors of the offeree shall appoint an independent adviser, on receipt of the offeror's statement under regulation 4 (4) in relation to the take-over offer. Section 10(2) The independent adviser appointed under paragraph (1) shall be an investment bank or a stockbroker licensed by the Authority. Section 10(3) The substance of the independent adviser's advice must be made known to the holders of the class of the voting shares to which the take-over offer relates, in a circular by the offeree to its shareholders. Section 10(4) The board of directors of the offeror shall appoint an independent adviser, where the take-over offer being made is a reverse take-over or where the board of directors of the offeror is faced with a conflict of interest situation. Section 10(5) The substance of any advice given to the board of directors of the offeror under paragraph (4) shall be made known to all the holders of voting shares of the offeror. Section 10(6) In the case of a reverse take-over, the board of directors of the offeror shall obtain approval of the holders of voting shares of the offeror to which the reverse take-over relates...

Section 11. Requirements for independent adviser Section 11(1)(a) has an interest in ten percent or more of the voting shares of an offeror or offeree at the present time or at any time during the twelve months preceding the date of announcement of the offeror's intention of the take-over scheme; Section 11(1)(b) has a substantial business relationship with the offeror or offeree at the material time or at any time during the twelve months preceding the date of announcement of the offeror's intention of the take-over scheme. Section 11(1)(c) being a company, has a director on its board of directors who is also a director on the board of directors of the offeror if the offeror is a company or on the board of directors of the offeree, as the case may be; Section 11(1)(d) is involved in financing the offer by the offeror; Section 11(1)(e) is a substantial creditor of either the offeror or the offeree. Section 11(1)(f) has a financial interest in the outcome of the take-over offer than that specified in paragraphs (a) to (d); or Section 11(1)(g) has been an adviser in planning or restructuring of the offeror or offeree including acquisitions, at any time during the period of twelve mon...

Section 12. Offer to dissenting shareholders Section Where a take-over results in the offeror acquiring ninety percent of the offeree's voting shares, the offeror shall offer the remaining shareholders a consideration that is equal to the prevailing market price of the voting shares or the price offered to the other holders, whichever is higher and the provisions of the Companies Act ( Cap. 486 ) shall apply.

Section 13. Competing take-over offer Section 13(1) Where a decision has been reached to make a competing take-over offer, all provisions in these Regulations relating to the take-over procedures shall apply mutatis mutandis except the notice period to the competing offer. Section 13(2) The competing offeror shall serve a competing take-over offer document required under regulation 7(4) at least ten days prior to the closure of the offer period and this period shall also apply to revisions that may be made to the competing offer.

Section 14. Offer period Section An offeror must keep a take-over offer open for acceptances for a period of thirty days from the date the take-over offer document is first served in accordance with regulation 7(4) or such period as may be determined by the Authority.

Section 15. Conditional offer Section Where the offer is conditional upon acceptances in respect of a minimum percentage of shares being received, the offer shall specify a date not being a date later than thirty days from the date of service of the take-over offer or such later date as the Authority may in a competitive situation or in special circumstances allow as the latest date on which the offeror can declare the offer to have become free from that condition.

Section 16. Variation of take-over offer Section 16(1) An offeror may vary the terms and conditions of a take-over offer including increasing the consideration offered in relation to the whole or part thereof provided such variation shall be made at least five days prior to the closure of the offer period. Section 16(2) The varied take-over offer document shall set out in an appropriate form particulars of such modification of the offeror's statements and information required under the Second Schedule as are necessary having regard to the variations. Section 16(3) The offeror shall serve the varied take-over offer document on the offeree, the Authority and the securities exchange within twenty-four hours of making the decision to vary the take-over offer, and simultaneously make a public announcement by press notice in at least two English language dailies of national circulation disclosing material variations to the offer.

Section 17. Withdrawal of take-over offer Section 17(1) An offeror shall not withdraw a take-over offer without the prior written approval of the Authority. Section 17(2)(a) make a take-over offer for the voting shares that had been the subject of the take-over offer that has been withdrawn; or Section 17(2)(b) acquire any additional voting shares of the offeree other than as provided under regulation 3. Section 17(3) The offeror and all related companies or persons acting in concert or associated with the offeror shall furnish the Authority with details of any acquisition by the offeror and related companies or persons acting in concert or associated with the offeror of any share of the offeree including any option to acquire any share in the offeree each month for a period of twelve months from the date on which the take-over offer was withdrawn. Section 17(4)(a) the offeree shareholders have rejected the take-over offer; Section 17(4)(b) the offeror has not obtained an approval under the Restrictive Trade Practices, Monopolies and Price Control Act ( Cap. 504 ) or any other regulatory approval as may be required; Section 17(4)(c) events, satisfactory to the Authority occur, rend...

Section 18. Closing of take-over offer Section 18(1) A take-over offer shall be deemed to close on the last day of the offer period. Section 18(2) A holder of the voting shares in the offeree may withdraw acceptance out of his own volition at any time before the closing of the offer.

Section 19.Pro-rataacceptances Section 19(1) Where an offeror receives acceptance by the offeree shareholders in excess of the total number of shares to which the take-over offer relates, the offeror shall undertake pro-rata acceptance. Section 19(2) For the purposes of this regulation, "pro-rata acceptance" means an allocation of acceptance by the offeror in the proportion of the total number of shares accepted by each offeree shareholder in relation to the percentage upon which the offer was conditional.

Section 20. Announcement of acceptances Section for which acceptances of the take-over offer have been received after having been served with the take-over offer document by the offeror to offeree shareholders in accordance with regulation 7(4);

Section 21. Identity of offeror Section proposed offeror and all related companies or persons acting in concert or associated with the proposed offeror;

Section 22. Evidence of ability to implement the take-over offer Section 22(1)(a) the take-over offer would not fail due to insufficient financial capability of the offeror; and Section 22(1)(b) every offeree shareholder who wishes to accept the take-over offer will be paid in full. Section 22(2) A person who has no intention of making an offer in the nature of a take-over offer shall not give notice or publicly announce the intention to make a take-over offer. Section 22(3) A person shall not make a take-over offer or give notice or publicly announce that it intends to make such an offer it has no reasonable or probable grounds for believing that it will be able to perform its obligations if the offer is accepted.

Section 23. Favourable deals Section The offeror shall not enter into any agreement, arrangement or understanding to deal in or make purchases or sales of voting shares of the offeree, either during a take-over offer or when such a take-over offer is reasonably in contemplation by the offeror where the agreement, arrangement or understanding contain favourable conditions which are not being extended to all offeree shareholders.

Section 24. Convertible securities Section 24(1) Where a take-over offer is made for the voting shares of an offeree and the offeree has issued convertible securities, the offeror shall make a take-over offer to purchase the securities and shall make appropriate arrangements to ensure that the interests of holders of convertible securities are safeguarded. Section 24(2) The offeror shall serve the take-over offer document to purchase the securities referred to in paragraph (1) to the holders of the convertible securities at the same time as when the take-over offer document is served on the offeree shareholders in accordance with regulation 7(4). Section 24(3) The take-over offer to holders of convertible securities referred to in paragraph (1) may be affected by way of take-over scheme approved at a meeting of the holders of the convertible securities. Section 24(4) For the purposes of these Regulations, "convertible securities" of the offeree means securities that are convertible to ordinary shares of the offeree".

Section 25. Sales and disclosure by the offeror during the offer period Section 25(1) The offeror shall not sell any voting shares to which the take-over offer relates during an offer period. Section 25(2) A related company or a person associated or acting in concert with the offeror shall not sell any voting shares to which the take-over offer relates other than to the offeror. Section 25(3)(a) the offeror and all related companies or persons associated to or acting in concert with the offeror; Section 25(3)(b) the chief executive, a director or an officer of the offeror who occupies or acts in a senior managerial position in the offeror, by whichever name called; Section 25(3)(c) a person who is an associated person in relation to persons referred to in paragraphs (a) and (b); and Section 25(3)(d) a person who is accustomed to act in accordance with directions or instructions of the persons referred to in paragraphs (a), (b) or (c). Section 25(4) The disclosure under paragraph (3) shall be made to the relevant securities exchange where the securities of the offeror are listed and to the Authority, within twenty four hours of the transaction. Section 25(5) All dealings in voting s...

Section 26. Information by offeree Section a list and addresses of the offeree's holders of voting shares in the offeree to which the take-over offer relates;

Section 27. Frustrations of offers by the offeree Section 27(1)(a) issue any authorized but un-issued shares of the offeree; Section 27(1)(b) issue or grant options in respect of any un-issued shares of the offeree; Section 27(1)(c) create or issue or permit the creation or subscription of any shares of the offeree; Section 27(1)(d) sell, dispose of or acquire or agree to sell, dispose of or acquire assets of the offeree or of any of its subsidiary; or Section 27(1)(e) enter into or allow contracts for or on behalf of the offeree to be entered into otherwise than in the ordinary course of business of the offeree. Section 27(2) Paragraph (1) shall not apply where a bona fide contract has been entered into prior to contact with the offeror or its agent or on receipt of the notice of intention of the take-over notice under regulation 4(1) which is not designed to frustrate a take-over offer or change the activity of the offeree.

Section 28. Disclosure of dealings by offeree Section 28(1)(a) the offeree; Section 28(1)(b) substantial shareholders of the offeree; Section 28(1)(c) any chief executive, a director of the offeree; Section 28(1)(d) any officer of the offeree who occupies or acts in a senior managerial position in the offeree, by whatever name called; Section 28(1)(e) a person who is an associated person in relation to persons referred to in paragraphs (a), (b), (c) and (d); and Section 28(1)(f) a person who is accustomed to act in accordance with directions or instructions of the persons referred to in paragraph (a), (b), (c), (d) or (e). Section 28(2) The disclosure under paragraph (1) shall be made to the relevant securities exchange, and the Authority within twenty four hours of the transaction, outside trading hours. Section 28(3) All dealings of voting shares of the offeror or the offeree made by an associated person for the account of investment clients who are not themselves associated persons shall be disclosed to the relevant securities exchange and the Authority, as provided in paragraphs (1) and (2).

Section 29. Transfer to the offeror Section On completion of the take-over offer, the offeree shall ensure prompt transfer of the accepted voting shares to the offeror in the register of members maintained as required under the rules of the securities exchange or the Central Depositories Act (Cap. 485C) in the case of electronic transfer and registration.

Section 30. False or misleading information Section 30(1)(a) provide or cause to be provided to the holders of voting shares or their professional advisers any document or information in a take-over offer that is false or misleading; Section 30(1)(b) provide, or cause to be provided to holders of voting shares or their professional advisers any document or information in a take-over offer in which there is a material omission; or Section 30(1)(c) engage in conduct relating to a take-over offer that is misleading or deceptive or is likely to mislead or deceive holders of voting shares or their professional advisers. Section 30(2) Where information or a document has been circulated or provided to holders of voting shares or their professional advisers and the person who provided the information or document, or engaged in the conduct becomes aware that the document or information was false or misleading or contains a material omission or the conduct in question was misleading or deceptive, the person shall immediately disclose the fact to the Authority and the relevant securities exchange and make an announcement by way of press notice in at least two English language dailies of natio...

Section 31. Submission of information to the Authority Section A person involved in a take-over scheme, merger or compulsory acquisition, shall submit such information to the Authority as it may from time to time require.

Section 32. Suspension of trading during take-over Section In the event of a take-over the trading of shares of the security of the offeree shall not be suspended unless for the purpose of enabling the offeree to disclose information on the takeover offer or as may be directed by the Authority for the purpose of obtaining material information on the offer.

Section 33. Issuance of shares in a subsidiary Section 33(1)(a) twenty-five percent or more of the share capital of that subsidiary; or Section 33(1)(b) ten percent or more of the share capital of the subsidiary, that has contributed to twenty five percent or more to the average turnover in the latest three financial years of the listed company (preceding the proposed issuance of shares), Section 33(2) The information circular referred to in paragraph (1) shall be subject to prior approval by the Authority and shall comply with the requirements under the Capital Markets (Securities) (Public Offers, Listing and Disclosures) Regulations (sub. leg).

Section 34. Establishment of take-over committee Section 34(1) The Authority may establish a sub-committee of the Board that shall consist of the Board members and such other qualified persons as shall be appointed by the Authority, for the purpose of advising on the take-over on a case by case basis. Section 34(2) Where a sub committee has been established under paragraph (1), the chief executive of the Nairobi Stock Exchange and the Commissioner of Monopolies and Prices appointed under the Restrictive Trade Practices, Monopolies and Price Control Act ( Cap. 504 ) shall be invited to the sub committee meetings. Section 34(3) The sub committee in exercise of its delegated responsibility may invite the offeror, the offeree, the independent adviser or any other person whose input is deemed necessary for the purposes of facilitating the take-over. Section 34(4) The decision of the sub committee shall be subject to ratification by the Board.