Answer ... (a) Commercial/corporate
While Kenyan companies law provides that entry in a company’s register is conclusive as to ownership of shares, it is common practice to have this tally with the records maintained at the Companies Registry and an official search obtained. The records at the Companies Registry are not always up to date and obtaining an updated official search may be time consuming.
(b) Financial
A Collateral Registry was established in 2017 under the Movable Properties Security Rights Act in relation to securities over moveable property. A security right in any moveable asset is effective against third parties if a notice with respect to the security right is registered. It is therefore important to carry out a search at this recently established registry.
(c) Litigation
The decisions of the Kenyan labour courts are heavily skewed in favour of employees. A conservative approach should be taken in the event of litigation liability in relation to employee disputes.
(d) Tax
M&A activity is likely to trigger an audit by the Kenya Revenue Authority after completion of the transaction. The authority has been increasingly aggressive in its conduct of tax audits in such circumstances. It is prudent to carry out a comprehensive tax due diligence on the target prior to acquisition.
(e) Employment
See question 3.1(d).
(f) Intellectual property and IT
The Kenya Industrial Property Institute is undertaking a clean-up of its Trademark Register. The institute has listed 2,496 trademarks that it intends to remove from the register if they are not renewed by their owners. It is important to ensure that the intellectual property held by the target is registered and the registration is current.
(g) Data protection
Kenya recently enacted the Data Protection Act, 2019, but is yet to develop regulations to operationalise the new law. However, targets that handle personal data either as data processors or data controllers ought to ensure they are compliant with principles of fairness, transparency, purpose limitation, etc under the Data Protection Act.
(h) Cybersecurity
Cybersecurity will largely be dealt with under the data protection legislation, as this will be covered under an entity’s protocols in place to enforce data protection.
(i) Real estate
Under Kenyan law, agricultural land cannot be held by a foreign company or a company that is under the control of foreign persons. There are also restrictions on foreigners dealing in shares of a company that holds agricultural land. It is therefore important to carefully consider the structure of a transaction where one of the target’s assets is agricultural land.