Listed companies are staring at tighter regulations after the Capital Markets Authority signed a year-long deal with the International Finance Corporation to develop a framework aimed at tracking implementation of rules.
The CMA and the IFC yesterday said they will develop a reporting framework for issuers of shares, bonds and other securities on the Nairobi Securities Exchange to monitor how well the guidelines are applied, and to help independent governance auditors to provide assurance.
“We want to have a sustainable, competitive and stable capital market,” CMA chairman James Ndegwa said. “The agreement will position Kenyan firms to be more competitive.”
Under the programme, the two will also develop a toolkit which will enable capital markets actors to apply and monitor the new corporate governance standards when they issue securities in Kenya.
The authority has put in place measures to help address money laundering, conflict of interest and fraud at listed companies, as well as increase transparency.
Among them is the requirement that boards fully disclose any non-compliance to relevant stakeholders including the CMA.
The new rules also prohibit directors from holding the chairman post in more than two listed firms.
Company boards are also required to have at least a third non-executive directors, while chairpersons will be delinked completely from day-to-day running of the firms they oversee.
“Good corporate governance practices make local businesses more competitive and resilient, and so support economic growth and stability,” IFC director for East and South Africa Oumar Seydi said.
Code of corporate governance practices for issuers of securities to the public was enacted on March 4, 2016.
Listed firms are required to record and maintain a register of all conflict of interest declarations by the directors.
The new CMA rules also limit the term limit of independent directors to nine years.
Publication of the guidelines, which were formulated in 2014, came after rising cases of mismanagement and abuse of power by several company directors.
In January, a KPMG preliminary audit on Uchumi Supermarkets indicated that several managers and directors, including ex-CEO Jonathan Ciano, were major suppliers of the firm currently facing financial problems.
Previously listed CMC Motors also suffered financial problems when it emerged in 2011 that the company might have lost nearly Sh2 billion between 2007 and 2011 to a firm associated with a director of the board, who was once its chairman.