Vol 15 (2018) - Issue 4

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Statutory Protection for Oppressed Minority Shareholders in Kenya: Reflections on the Reforms under the Companies Act 2015

Introduction

As a result of its renewed investment and commercial vibrancy, Africa has become the world’s most rapidly growing economic region. This economic growth has had a positive impact on Kenya, whose economy has, over the last five decades, realised the highest growth in the East African region. This has been made possible by its active private sector, which makes a major contribution to the country’s GDP.1 According to the World Economic Forum’s 2015-2016 Global Competitiveness Index, Kenya is also amongst the most competitive economies in sub-Saharan Africa.2 To maintain this enviable position and spur more economic growth, Kenya needs to enhance the momentum that has led to the creation of its conducive business environment. This includes having a competitive legal framework that attracts investors and protects their interests.
Kenya’s legal framework for protecting shareholders’ interests has shown tremendous improvement since the enactment of the Companies Act 2015. According to the World Bank’s Doing Business Survey of 2016, the framework for protecting shareholders’ interests in Kenya was ranked at number 112 out of 189 countries in the world and number 17 out of 47 countries in sub-Saharan Africa. In 2017, the ranking improved to number 87 out of 189 countries in the world.3 Although this improvement is commendable, there is still room for improvement if Kenya is to become the most competitive investment market in sub-Saharan Africa.
It is against this background that this article assesses whether the Companies Act 2015 provides an efficient framework that allows minority shareholders in Kenya to protect their interests whenever the same are threatened by the majority. In the past, minority shareholders have been constrained largely by the need to prove fraud on the minority as well as having to prove grounds for winding up before they could get a remedy from the courts. This article examines how these two obstacles have been addressed under the Companies Act 2015. Whilst the first part of the article assesses the minority shareholders’ protection regime under the Companies Act 1962, the second part looks at the regime under the Companies Act 2015. The third part considers regimes in other jurisdictions and the fourth part offers some concluding remarks.