Kenyan legislation

The Capital Markets (Public Offers, Listings and Disclosures) Regulations, 2023

Edition: 2023-12-15 · In force

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Part I – PRELIMINARY

1. Citation

These Regulations may be cited as the Capital Markets (Public Offers, Listings and Disclosures) Regulations, 2023.

2. Interpretation

(1)In these Regulations, unless the context otherwise requires—“adequate working capital” means an amount of working capital sufficient to meet operational requirements of the business concern under normal circumstances;“admission” means admission of securities to the Official List of a Securities Exchange;“aggregated portfolio basis” means the percentage of proceeds allocated to certain project categories due to a large number of underlying projects in green bond issuances;“associate” has the meaning assigned to it in the Act;“book building” means a process undertaken to elicit and assess demand and price of securities for purposes of the determination of the quantum or value or coupon of specified securities to be offered in accordance with these Regulations;“business combination”, in relation to a Special Purpose Acquisition Company, means a merger or amalgamation or acquisition of shares or assets of one or more companies having business operations;“Central Bank of Kenya” means the Central Bank of Kenya established under Article 231 (1) of the Constitution;"circular" means an information document issued to holders of listed securities in connection with proposed corporate action or transaction;"company" means a limited liability company wherever incorporated or otherwise established and includes a corporation;“compliance officer” means a person engaged by an issuer to ensure the compliance of the issuer with the obligations of an issuer under these Regulations and the Act;“corporate action” means an action or transaction undertaken or to be undertaken by an issuer which may affect the numbers, price, characteristics, value, status, classes and categories of the security, and shall include dividend, merger or take-over, consolidations and split of securities and additional issues;“cross listing” means the listing on a securities exchange in Kenya of securities that are already listed on another securities exchange;“days” means calendar days excluding Saturdays, Sundays and public holidays;"Directors Training Program" means an accredited training programme for training in relation to, among others, directors’ responsibilities, corporate governance, regulatory compliance and accountability, whether it is restricted to the Code or not;"dual listing" means the initial listing of securities listed on two or more securities exchanges;“distributable profits” has the meaning assigned to it under Section 423 of the Companies Act (Cap. 485);“East African Community Partner State capital markets regulator” means the regulator or government entity charged with the supervision of capital markets in an East African Community partner state;“East African Community partner state” means a state which is a member of the East African Community;“electronic offer” means a public offer that is conducted on the internet or by other electronic or automated means or media, wholly or partially, where investors subscribe to the offer of securities by submitting applications electronically or the applications and allotments are processed and completed electronically, wholly or partially;“eligible projects” means project categories in green bonds that contribute to environmental objectives including but not limited to climate change mitigation, climate change adaptation, natural resource conservation, biodiversity conservation, and pollution prevention and control;“executive director” means a member of a board of directors of a company who also serves as a manager in the company;“founding shareholder”, in relation to a special purpose acquisition company, means persons who founded, initially financed or sponsored the establishment of the special purpose acquisition company;“green bond” means a fixed income instrument, either unlisted or listed on a securities exchange, approved by the Authority, whose proceeds are used to finance or refinance new or existing projects that generate climate or other environmental benefits that conform to green guidelines and standards;“green guidelines and standards” means guidelines and standards including—

(a)Green Bond Principles, as may be amended, issued and governed by the International Capital Markets Association;

(b)Green Bond Standards including the Climate Bonds Standard, as may be amended, issued and governed by the Climate Bonds Initiative;

(c)Government policies and guidelines including the Kenya National Policy on Climate Change and Green Economy Strategy, among other Government policies; or

(d)any other standard acceptable to the Authority;

“green shoe option” or “over-allotment option” means, in relation to an offer, the right reserved by an issuer to allot up to a specified number of securities in excess of the number of the relevant securities declared as the securities on offer and available under the offer;“green washing” means deceptive or misleading practices by the issuers of securities to the public or any other person or entity licensed or approved by the Authority that create a false or exaggerated impression of environmental responsibility or sustainability efforts by the issuer, person or entity;“ISA” means International Standards on Auditing as issued by the International Auditing and Assurance Standards Board or its successor;“IFRS” means International Financial Reporting Standards as developed and issued by the International Accounting Standards Board or its successor;“independent director” means a member of a board of directors who–

(a)is not an executive director;

(b)does not have a material or pecuniary relationship with the company or related persons;

(c)is compensated through sitting fees or allowances; and

(d)does not own shares in the company:

Provided that after six years of continuous service as such director, such person shall no longer be considered as an independent director;“Independent Verifier” in relation to a green bond means an entity, independent of an issuer, its directors, senior management and advisers, compliant with the International Capital Markets Association’s Guidelines for External Reviewers or accredited under the Climate Bonds Standards and Certification Scheme, or any other professional body acceptable to the Authority, appointed by the issuer to confirm the green status of the Green Bond;“initial public offer” means an offer of specified securities by an unlisted issuer to the public for subscription and includes an offer for sale of specified securities to the public by any existing holders of such specified securities in an unlisted issuer;“Insurance Regulatory Authority” means the Insurance Regulatory Authority established under the Insurance Act (Cap. 487) and any successor regulator;“International Securities Identification Number” is a twelve-digit alphanumeric code that uniquely identifies a specific security and issued by the body duly authorized by the Association of National Numbering Agencies or its successor;“issuer”, in relation to any securities, means the person who has issued or is to issue securities to the public or a section thereof in Kenya, whether or not such securities are subject of an application for listing on a securities exchange or have been admitted to listing;“key personnel” means the officers or personnel of the issuer who are members of its core management team (excluding non-executive board members) and includes any other person whom the issuer may declare as a key managerial personnel and includes management team;“legal entity” means any entity established or recognized under the laws of Kenya as a body corporate including a limited liability company and a limited liability partnership;“listing” means admission of a security to the Official List of a securities exchange and the terms “list” and “listed” shall be construed accordingly, and listing shall be deemed to occur, for purposes of determining whether purchase of securities in a public offering was of listed securities, when the securities exchange communicates in writing its admission of such security;“listing by introduction” means the initial listing of securities that are publicly held other than as a result of an immediately preceding public offer;“listed issuer” means an issuer any of whose securities are listed on a recognized securities exchange;“Main Fixed Income Securities Market Segment” means a market segment for the listing of debt securities of issuers including but not limited to government and corporate bonds and debentures the initial offer size of which is over four hundred million shillings or such higher amount as the Authority may set from time to time;“Main Investment Market Segment” means a market segment for the listing of equity securities meeting the criteria set out in the First Schedule;“market segment” means a segment, defined in these Regulations or established by a securities exchange with the approval of the Authority, for the listing of securities that meet, or the securities of an entity that meets, a respective prescribed criteria;“material information” means any information relating to an issuer that may ordinarily affect the price of an issuer’s securities or influence investment decisions of investors and includes, without limitation, information on—

(a)a merger, acquisition or joint venture;

(b)the re-organization of the capital structure of the issuer;

(c)earnings and dividends, whether scrip or cash, of an unusual nature;

(d)the acquisition or loss of a significant contract;

(e)a significant new product or discovery;

(f)a change in control or significant change in management;

(g)a call of securities for redemption;

(h)a public or private sale of a significant amount of additional securities;

(i)the purchase or sale of a significant asset;

(j)a significant labour dispute;

(k)a significant dispute or determination thereof in respect of the issuer;

(l)establishment of a programme to make purchases of the issuer’s own shares;

(m)a tender offer for another issuer’s securities;

(n)significant alteration of the memorandum and articles of association of the issuer; or

(o)any other peculiar circumstances that may prevail with respect to the issuer or the relevant industry;

“material contract” means any contract or other arrangement to which a company or any of its subsidiaries is a party (other than the loan documents) for which breach, non-performance, cancellation or failure to renew could have a material adverse effect;“non-executive director” means a member of a board of a company who is not an executive director and is not an executive director or employee of a related entity;“offer” means an offer for subscription or purchase of securities in an issuer which, if accepted, would give rise to a contract for the issue or sale of the securities and, except where the context otherwise requires, “offer” and “offeror” shall be construed accordingly;“offer period” means a period of up to ten working days, or such longer period as the Authority may approve, during which an offer to the public remains open;“official list” means the list of securities listed on a securities exchange as maintained by a securities exchange, and updated from time to time;“off-market purchase” means the purchase of listed securities made outside the securities exchange, or on a securities exchange without having to comply with the trading rules of the exchange for exchange transactions;“on-market purchase” means the purchase of listed securities on a securities exchange in compliance with the trading rules of a securities exchange;“performance indicators and metrics” in relation to a green bond, means qualitative performance measures as may be prescribed in the green guidelines and standards;“permitted investments”, in relation to a SPAC, means investment in government bonds or treasury bills with maturity periods of not more than eighteen months;“private company” has the meaning ascribed to it under the Companies Act (Cap. 486);“private offer” means an offer of securities as defined in regulation;“private transaction” means a transfer of a listed security outside a securities exchange authorized by the Authority from one security holder to another whether or not it involves any consideration or change of beneficial interest or is otherwise authorized by the Authority under section 31;“public company” has the meaning ascribed to it under the Companies Act (Cap. 486);“public offer” means an offer which is not a private offer, and as more specifically described in regulation 9;“regional fixed income securities” means fixed income securities issued under regulation 9 (1)11;“Registrar of Companies” has the meaning assigned to it in the Companies Act (Cap. 486);“related entity” means in relation to a natural person, any person who is related to that person by marriage, affinity or consanguinity or who is a partner or employee of that person; and in relation to a company any entity which is its holding company, subsidiary of its holding company, or any person who controls that company whether alone or with such person’s related parties;“reporting accountant” means an accountant who holds a current practicing certificate issued by the Institute of Certified Public Accountants of Kenya in accordance with the Accountants Act (Cap. 531) and performs such functions of a reporting accountant as are set out in these Regulations;“restricted public offer” means a public offer restricted to sophisticated investors or such category or number of persons as the issuer shall prescribe in the short form prospectus;“resulting issuer”, in relation to a Speacial Purpose Acquisition Company, means the resultant combined entity whose securities trade on a securities exchange upon the completion of a business combination;“rights issue” means an offer of specified securities by a listed issuer to the shareholders of the issuer as on the records date fixed for that purpose;“secondary issue” means the issuance of securities by an issuer restricted to existing shareholders or holders of renounced rights, other than transactions at the initial public offering, and includes capitalization, rights issue, scrip dividend or bonus issue;“SME Fixed Income Securities Market Segment” means a market segment for the listing of debt securities the initial offer size of which is below four hundred million shillings or such higher amount as the Authority may set from time to time and meeting the criteria set out in the Third Schedule;“Small and Medium Enterprises Market Segment” means a market segment for the listing of equity securities issued by entities meeting the criteria set out in the First Schedule;“share buyback” means the purchase by a listed company of its own shares from shareholders;“shares registrar” means the person appointed by an issuer to maintain a register of the securities holding records of the issuer as required under any written law or the issuer’s rules;“shelf prospectus" means a prospectus in respect of securities or class of securities which are to be offered for subscription in one or more tranches over a specified period of time;“special purpose acquisition company” means a company with no prior operating history, no operating and revenue-generating business or asset at the point of the initial public offer, and which raises proceeds for the sole purpose of undertaking a business combination in accordance with the business strategy and acquisition mandate disclosed in the information memorandum issued in relation to the initial public offer by a special purpose acquisition company;“Special Purpose Acquisition Company IPO” means an Initial Public Offer in respect of a special purpose acquisition company;“sophisticated investor” has the meaning assigned to it under the Act; and also includes an individual, company, partnership, association or a trustee on behalf of a trust which, either alone or with any associates on a joint account who subscribes for securities with an aggregate issue price of not less than one million shillings or such high amount as the Authority may determine from time to time;“supplementary information memorandum” means the information memorandum referred to in regulation 25;“supranational body” means any global or regional body, institution or organization the members or constituents of which are governments, inter-governmental organizations or governmental organizations or agencies;“suspension” with respect to securities listed on a securities exchange, means a trading stoppage of more than one trading session;“trading halt” means a temporary suspension of trading of not more than one trading session at a time for a particular security or securities on a securities exchange;“transaction advisor” means a person appointed to carry out the responsibilities set out under regulation 32;“treasury shares” means the shares of a listed company that have been bought back by a listed company from the company’s shareholders and have not been cancelled or re-issued; and“valuation” means the assessment and determination of the value of a security including business combinations or assets of a business by the relevant professionals in accordance with International Valuation Standards.

3. Application

(1)These Regulations shall apply to —

(a)the offer or sale to the public in Kenya, of securities in any form, with or without listing;

(b)the listing of securities by introduction, including crosslisting;

(c)the offer, issue or listing of additional securities by issuers who have made public offers, with or without listing; and

(d)corporate actions by issuers of listed securities;

(e)private offers.

4. Guiding principles

The guiding principles of these Regulations are to—

(a)establish fair, efficient and transparent capital markets;

(b)encourage and promote the listing of securities on securities exchanges;

(c)promote full, timely and accurate disclosure of material information;

(d)eliminate or minimise challenges and disadvantages of listing securities;

(e)promote good corporate governance by listed entities and issuers of securities;

(f)promote the protection of investors and improve investor confidence in capital markets;

(g)promote the fair and equitable treatment of issuers and investors;

(h)promote the growth of the capital markets by encouraging and supporting the listing of new securities;

(i)leverage technology to improve the operations of capital markets;

(j)eliminate or minimise systemic risks in capital markets;

(k)promote the use of capital markets to facilitate business growth and innovation by businesses; and

(l)facilitate compliance with disclosure requirements and continuing obligations.

Part II – APPROVAL OF OFFERS OF SECURITIES AND LISTING

5. Approval for offers and listing

(1)These Regulations shall apply to any offer of securities to the public in Kenya, whether or not the issuer is seeking a listing on a securities exchange in Kenya.

(2)The Authority shall be the competent authority to grant approval for any public offer of securities to the public in Kenya, including a restricted public offer and listing of securities on a securities exchange in Kenya.

(3)A person granted approval by the Authority to offer securities to the public or list the securities on a securities exchange shall state that fact on all announcements of the offer or listing.

(4)Securities approved by the Authority for offer to the public in the primary market of a securities exchange with approval for listing and admission to listing having been issued shall, in respect to a decision to invest, be deemed to have been listed on the date the securities exchange communicates to the issuer its admission to listing:Provided that the issuer shall comply with any conditions or thresholds imposed by the securities exchange in respect to the listing of the securities.

6. Delegation of approval of offers and listing

(1)The Authority may, upon application by a securities exchange approved as a self-regulatory organization, delegate to the securities exchange the functions set out in subregulation (2) if the Authority is satisfied that the securities exchange has the technical, human resource and financial capacity to carry out the delegated role.

(2)The Authority may delegate to a securities exchange the approval of—

(a)the information memorandum for an offer of securities on any segment of that securities exchange;

(b)a public offer and listing of securities on any segment of that securities exchange;

(c)a secondary issue and listing of securities of issuers on any segment of that securities exchange;

(d)any announcement, circular or corporate action in relation to securities listed on any market segment of that securities exchange; or

(e)any other matter relating to any market segment of a securities exchange that the Authority may approve.

(3)A delegation under subregulation (1) shall be in writing and may be upon such conditions as the Authority may impose.

(4)A securities exchange to which a delegation has been made under this regulation shall notify the Authority of any approvals for public offers and listings granted by the securities exchange under the delegated authority.

(5)The Authority may, for reasons to be specified in writing, withdraw any of the powers delegated by it to a securities exchange under subregulation (6) if—

(a)any authorization granted to a securities exchange to operate as a self-regulatory organization is cancelled or suspended;

(b)where the securities exchange breaches any of the conditions imposed by the Authority on such delegation;

(c)the securities exchange ceases to hold any qualifications which enabled the Authority to so delegate; or

(d)where, in the opinion of the Authority, it is in the interest of the public to withdraw the delegation.

(6)The Authority shall give the securities exchange the opportunity to be heard before the withdrawal of a delegation under this regulation.

7. Listing of securities

(1)A securities exchange shall maintain an Official List in respect of all securities listed on the securities exchange.

(2)The securities exchange shall enter into the Official List the particulars of all securities that have been approved for listing.

(3)The securities exchange may only add securities to the Official List if the securities attain—

(a)the total minimum subscription of shares disclosed in the information memorandum approved by the Authority in respect of public offering and listing of securities; and

(b)the minimum subscribers prescribed for the respective market segment under these Regulations.

(4)The Official List shall, where applicable, include the following particulars in respect of each listed security—

(a)the name of issuer;

(b)the name of security;

(c)the International Securities Identification Number for the security;

(d)the total number of securities listed;

(e)the class of security;

(f)the type of security;

(g)the par value of the security;

(h)the listing date;

(i)the trading commencement date; and

(j)the redemption date.

8. Establishment of market segments

A securities exchange may, with the written approval of the Authority, establish and operate other market segments within the market segments set out in regulation 11(1) or prescribe or alter the eligibility requirements for such market segments so established.

Part III – PUBLIC OFFERS, ELIGIBILITY, DISCLOSURE AND GENERAL REQUIREMENTS

9. Meaning of “public offer”

(1)Subject to section 30A of the Act, a “public offer” includes—

(a)an initial offer of securities to the public by an issuer;

(b)a further or secondary or additional offer of securities to the public by an issuer; or

(c)an offer for sale of securities to the public by an existing shareholder or shareholders.

(2)A person offers securities to the public in Kenya if such offer is not a private offer as provided in regulation 17.

(3)For the purposes of this Part, there is an offer of securities to the public if there is a communication to any person which presents information on the transferable securities to be offered, and the terms on which they are offered to enable the offeree to decide whether or not to buy or subscribe for the securities in question and that communication is designed to, or could, reach at least one hundred persons.

(4)The onus will be on the offeror to demonstrate that any offer said to not to be a public offer is a private offer.

10. Issue of securities to the public and listing

An issuer shall seek approval from the Authority for the listing of its securities in one or more of the following ways—

(a)offer for subscription for new securities;

(b)offer for sale of existing securities;

(c)listing by introduction; or

(d)cross-listing.

11. Eligibility to issue securities

A person is not eligible to issue securities to the public or list at a securities exchange, unless—

(a)with respect to securities to be listed on the Main Investment Market Segment, the issuer meets the eligibility requirements prescribed in Part A of the First Schedule;

(b)with respect to securities to be listed on the Small and Medium Enterprises Market Segment, the issuer meets the eligibility requirements as set out in Part B of the First Schedule;

(c)with respect to securities to be listed on the Main Fixed Income Securities Market Segment, the issuer meets the eligibility requirements set out in Second Schedule;

(d)with respect to securities to be listed on the Small and Medium Enterprises Fixed Income Securities Market Segment, the issuer meets the eligibility requirements set out in the Third Schedule;

(e)with respect to regional fixed income securities to be issued within a Partner State of the East African Community, the issuer meets the eligibility requirements set out in the Fourth schedule;

(f)with respect to any other market segment, and subject to regulation 8(3), the issuer meets the eligibility requirements prescribed by the securities exchange.

12. Issue by sovereign states

(1)These Regulations shall not apply to the issuance of securities by sovereign states or entities.

(2)Despite sub-regulation (1), the listing of securities by sovereign states or entities shall require the approval of the Authority before listing.

13. Issue by national or county entities

The Authority may prescribe different eligibility and disclosure requirements for the issue and listing of securities to the public by a national government entity, a county government or a county government entity.

14. Issuers not seeking listing

(1)An issuer of securities to the public who does not wish to list the securities on a securities exchange shall meet the eligibility criteria and comply with the disclosure requirements prescribed for—

(a)Small and Medium Enterprises Market Segment in the case of equities; and

(b)Small and Medium Enterprises Fixed Income Securities Market Segment in the case of debt securities.

(2)An issuer who does not wish to list the securities on any market segment shall establish and maintain mechanisms approved by the Authority for facilitating trading and price discovery of the securities.

(3)An issuer who has made a public offer in accordance with subsection (1), may, after the expiry of one year since the securities ceased to be the subject of an offer to the public, list the securities by introduction.

15. Transfer to new market segment

(1)An issuer whose securities are listed on a market segment of a securities exchange shall not be eligible to transfer the listed securities to another market segment before the expiry of one year from the date of the first listing.

(2)A transfer of securities from, or to, a market segment of a securities exchange shall—

(a)be subjected to the eligibility criteria of the new segment;

(b)comply with the disclosure requirements of the new segment; and

(c)be subjected to the approval of the securities exchange:

Provided that the Authority shall be notified within fourteen days of any application being made, and its views considered, before approval is granted by the securities exchange.

16. Dealing with additional issues of securities

An issuer whose securities are listed at a securities exchange shall not issue, or authorize its share registrar to issue or register, by way of capitalization, scrip dividend, additional rights issue or additional shares of the class listed to a greater amount than the number authorized for listing except in accordance with the disclosure requirements for additional listing prescribed in the Twelfth Schedule.

Part IV – PRIVATE OFFERS

17. Private offers

(1)For the purposes of these Regulations, an offer of securities shall be regarded as a private offer if the offer is made to a person in Kenya under any of the following conditions—

(a)the securities are offered to not more than one hundred persons who are specifically identified and the offer shall remain open for a continuous period not exceeding twelve months, and the offer shall not be repeated with wholly or partially different persons by the same entities or related parties, or ultimately for a common purpose, within a period of twenty-four months from the date of the first offer;

(b)the securities are offered to the members of a club or association (whether or not incorporated) by or on behalf of that club or association, and the members can reasonably be regarded as having a common interest with each other and the club or association in its affairs and in what is to be done with the proceeds of the offer:

Provided that such club or association or interest has not been established, created or designed to defeat the mandate of the Authority to oversee public offers;

(c)the securities are offered in connection with a valid invitation to enter into an underwriting agreement with respect to the securities;

(d)the securities are of a private company and are offered by that company to—

(i)shareholders or employees of the company; or

(ii)members of the families of any such shareholders or employees;

(e)the securities are of an unlisted public company and are offered by that company to shareholders of the company;

(f)the securities are offered to a restricted circle of persons whom the offeror reasonably believes to be sufficiently knowledgeable to understand the risks involved in accepting the offer and the number of such persons does not exceed one hundred;

(g)the securities are offered to the controlling shareholders, substantial shareholders or directors of the issuer or the issuer’s parent or subsidiary companies or associates;

(h)the securities result from the conversion of convertible securities in respect of which the Authority had already approved an information memorandum; or

(i)the securities of a listed company are offered in connection with a take-over scheme approved by the Authority.

(2)For the purposes of subregulation (1)(d)(ii), the members of a person's family include a spouse, son, adopted son, step-son, son-inlaw, daughter, adopted daughter, step-daughter, daughter-in-law, father, step-father, father-in-law, mother, step-mother, mother-in-law, brother, step-brother, brother-in-law, sister, step-sister, sister-in-law, grandchild or spouse of a grandchild of that person, and any trustee (acting in his or her capacity as such) of a trust the principal beneficiary of which is the person or any of the person’s relatives.

(3)An offer made under this regulation shall be made only to a person whose name is recorded by the offeror prior to the invitation to subscribe, and that such person shall receive the offer by name, and that a complete record of any such offerees shall be kept by the company and submitted to the Authority on demand.

(4)The Authority may require the issuer in a private offer to submit a list of the targeted investors.

(5)An issuer offering securities under this regulation shall not issue any public advertisements or utilize any media, marketing or distribution channels or agents to inform the public, or capable of informing the public, about such an offer.

(6)An offer or invitation which does not comply with the provisions of this Part shall be a public offer, or a restricted public offer, as the case may be, and the provisions of these Regulations relating to public offers or restricted public offers shall apply to that offer or invitation.

Part V – REQUIREMENTS FOR PUBLISHING INFORMATION MEMORANDUM, SHORT FORM PROSPECTUS AND INFORMATION NOTICE

18. Requirement for information memorandum

(1)A person shall not make an offer of securities to the public unless that person publishes an information memorandum in respect of the offer approved by the Authority or by a securities exchange in exercise of delegated authority.

(2)The issuer shall comply with any requirements of any law, including the Companies Act (Cap. 486), regarding the registration of an information memorandum.

(3)The issuer shall, during the offer period and for such additional period as may be prescribed by the Authority, make the information memorandum available to the public or to the section of the public to whom the offer is made free of charge.

(4)The issuer shall be deemed to have complied with the requirements of subregulation (3) if the issuer—

(a)publishes the information memorandum on its official website;

(b)publishes the information memorandum in a newspaper with a nation-wide circulation;

(c)delivers the information memorandum to the respective electronic mail addresses of the offerees;

(d)publishes the information memorandum in such other digital platform as may be approved by the Authority; or

(e)publishes the information memorandum in any other manner as may be prescribed or approved by the Authority.

(5)An issuer shall deliver a copy of the approved and published information memorandum to the Authority and the securities exchange on or before the first day of the offer.

19. Content of information memorandum

(1)An information memorandum shall include the following information—

(a)a reporting accountant’s report confirming that the issuer has complied with the financial disclosures prescribed under these Regulations with respect to the relevant market segment:

Provided that the reporting accountant’s report shall be prepared by a different accountant from the one currently auditing the books of the issuer and it shall be sufficient for the reporting accountant’s report to be issued by a different accountant within the same firm of accountants; and

(b)a legal opinion which shall include the following details—

(i)the legal status of the issuer;

(ii)whether all licences and consents required to carry on the business or proposed business of the issuer have been duly obtained;

(iii)the validity of evidence of ownership of land, plant and equipment and other important and relevant assets of the issuer;

(iv)any agreements or contracts regarding the proposed issue of securities including underwriting contracts or contracts with any securities exchange, registrar and trustees of bonds, debentures or other credit securities;

(v)any material litigation, prosecution or other civil or criminal legal action in which the issuer or any directors of the issuer is involved;

(vi)any contracts which have a material impact on the issuer’s business and the public offer and listing of the issuer’s securities;

(vii)whether the existing capital of the issuer and any proposed changes thereto conforms with applicable laws and has received all necessary authorizations; and

(viii)any other material information regarding the legal status of the issuer and the proposed issue.

20. Signing of information memorandum

(1)An information memorandum under regulation 19 shall, before publication, be signed—

(a)where an issuer which is a corporation, by each director or equivalent person of the issuer and each person who is named in the information memorandum as a proposed director or an equivalent person of the issuer;

(b)where the issuer is the Government, state corporation or an entity duly established in Kenya by an official of the Government, state corporation or duly established entity who are duly authorized to sign the information memorandum; or

(c)where the person making the offer is an individual but is not the issuer, by that person.

(2)The information memorandum shall be published in the English language.

21. Electronic offers

(1)An issuer may, when obtaining approval of an offer, notify the Authority, and, where applicable, the securities exchange, that the offer shall be made electronically and include that fact in the information memorandum.

(2)The Authority may approve an electronic offering if satisfied that the technology to be used for such offer affords sufficient opportunity for each application to be treated fairly or equitably.

(3)The issuer in an electronic offer shall ensure that the information memorandum is disclosed in the same form and content approved by the Authority.

(4)The results of an electronic offer shall be published in the same manner as the information memorandum was published.

22. Allocation policy

(1)An issuer of securities shall establish and disclose in the information memorandum a fair and equitable allocation policy for the allocation of the securities in a public offer.

(2)An issuer of securities shall establish mechanisms for sensitization of investors to invest in the issue of the issuer’s securities.

(3)An issuer shall notify the Authority and, where there is a listing, the securities exchange at least twenty-four hours before the publication of the result of the offer.

23. Form and content of information memorandum

(1)The content of an information memorandum shall comply with the—

(a)Sixth Schedule, where the issuer seeks to raise capital and list in the Main Investment Market Segment;

(b)Seventh Schedule, where the issuer seeks to list on the Main Investment Market Segment by way of introduction;

(c)Eighth Schedule, where the issuer seeks to list and raise capital on the Small and Medium Enterprises Market Segment;

(d)Ninth Schedule, where the issuer seeks to list on the Small and Medium Enterprises Market Segment by introduction;

(e)Tenth Schedule, where the issuer seeks to list in the Main Fixed Income Securities Market Segment;

(f)Eleventh Schedule, where the issuer seeks to list securities on the Small and Medium Enterprises Fixed Income Securities Market Segment; and

(g)such other requirements as the Authority may prescribe or approve with respect to any other market segment or issue of securities for which the Authority has jurisdiction.

(2)Despite subregulation (1), the Authority may prescribe different disclosure requirements for an entity listed on a foreign securities exchange recognized by the Authority that is seeking to cross-list on a securities exchange in Kenya.

(3)Every information memorandum shall contain the following statement on its front page—“As a matter of policy, the Capital Markets Authority [and the Securities Exchange] assumes no responsibility for the correctness of any statements or opinions made or reports contained in this information memorandum. Approval of the issue or listing is not to be taken as an indication of the merits of the issuer or of the securities.”

24. Additional information in an information memorandum

(1)In addition to the information required to be disclosed under regulations 19 and 23, an information memorandum shall contain all such information as investors would reasonably require, and reasonably expect to find in the memorandum, for the purpose of making an informed assessment of—

(a)the assets, liabilities, financial position, profits, losses and prospects of the issuer of the securities; and

(b)the rights attaching to the securities being offered.

(2)The additional information under subregulation (1) shall be such information as is within the knowledge of any person responsible for the information memorandum or which it would be reasonable for him or her to obtain by making diligent enquiries.

(3)In determining what information is required to be included in an information memorandum under this regulation, regard shall be had to the nature of the securities and offeror of the securities.

(4)The Authority and securities exchange may require additional information to be included in an information memorandum if it is in the interests of investors for such information to be in the information memorandum.

25. Supplementary information memorandum

(1)Where an information memorandum has been approved under these Regulations in respect of a public offer and, at any time between the approval date and closing date of the offer—

(a)there is a significant change that affects any matter contained in the information memorandum the inclusion of which was required by these Regulations;

(b)a significant new matter arises the inclusion of information in respect of which would have been so required if it had arisen when the information memorandum was first prepared; or

(c)a significant inaccuracy in the information memorandum, is discovered,

the offeror shall, on its own motion, with prior consent of the Authority or a securities exchange (where the Authority has delegated the approval function to a securities exchange, or if required by the Authority or a securities exchange (where applicable), publish a supplementary information memorandum containing particulars of the change or new matter or, in the case of an inaccuracy, correcting the inaccuracy, and deliver (if applicable) the supplementary information memorandum to the Registrar for registration.

(2)Where a supplementary information memorandum in respect of a public offer has been approved, these Regulations shall have effect as if any reference to an information memorandum is a reference to the information memorandum originally published and that supplementary information memorandum, taken together.

(3)The provisions of regulation 28 shall apply to a supplementary information memorandum.

26. Change of basis of approval

Where, in the opinion of the Authority or the securities exchange, where applicable, circumstances have occurred or new information has emerged that fundamentally alters the basis of approval of a public offer before the allotment date in the case of an offer, or date of trading in the case of an introduction, which renders the information memorandum inadequate, the Authority may require the issuer—

(a)to issue a supplementary information memorandum disclosing such additional information;

(b)to extend the offer period to allow each investor to make an informed decision in light of the new disclosure;

(c)to reopen the offer for such period as shall be determined by the Authority or securities exchange, as the case may be, to allow each investor to reconfirm the investor’s application for subscription or withdraw the application; or

(d)to cancel the offer and, where applicable, the listing.

27. Omission of certain information

The Authority may, upon application by the issuer, authorize the omission from an information memorandum of information whose inclusion would otherwise be required by these Regulations if the Authority considers that the disclosure of that information would be prejudicial to the interest of the offeror, but its omission does not prejudice the interest of investors.

28. Abridged information memorandum

(1)An advertisement, notice, poster or document including an abridged information memorandum announcing a public offer or listing of securities for which an information memorandum is or will be required under these Regulations shall not be issued to or caused to be issued to the public in Kenya unless it states that an information memorandum is or will be published and provides a website or other electronic location or an address in Kenya where the information memorandum can be obtained.

(2)An advertisement, notice, poster or document referred to in subregulation (1) shall be submitted to the Authority and securities exchange not later than forty-eight hours before the proposed publication, and the Authority or securities exchange may require such amendments to be made to the information memorandum as may be necessary.

(3)Each application form for subscription of the securities offered in an information memorandum shall state, in a conspicuous position, where the information memorandum may be obtained, and the issuer shall disclose to the Authority the number, if applicable, of physical copies of the information memorandum that have been printed.

(4)Each issuer shall publish an abridged information memorandum in the same manner as the issuer publishes the information memorandum.

(5)An abridged information memorandum shall disclose basic information regarding the issuer including—

(a)a summary of the balance sheet, and profit and loss accounts for the three years immediately preceding the issue or such shorter period as may apply with respect to a particular market segment;

(b)the broad ownership structure of the issuer before the issue and anticipated structure after the issue;

(c)the particulars of the issue; and

(d)any other material information regarding the issue.

29. Short form prospectus

(1)A person who intends to make a restricted public offer shall submit a short-form prospectus to the Authority for approval.

(2)The short-form prospectus shall be in the form set out in the Fourteenth Schedule and include—

(a)the name of issuer;

(b)a summary of description of business;

(c)a summary of description of issue;

(d)a disclosure of documents incorporated by reference in relation to the financial affairs of the entity or any significant matter as required for a full prospectus;

(e)the number, price and type of securities;

(f)conditions of the issue, if any;

(g)a detailed schedule of use of the proceeds;

(h)a description of securities and rights thereto;

(i)completed and ongoing acquisitions in the preceding two years;

(j)a description of any underwriting arrangement and if the underwriter has any conflict of interest;

(k)any other material information; and

(l)any other information that the Authority may direct.

30. Information notice

(1)A person who intends to issue securities—

(a)in the case of any issue or offer, other than a private offer, that may be exempted by the Authority from issuing an information memorandum or a short-form prospectus; or

(b)in the case of a restricted public offer of securities where—

(i)the maximum amount which may be raised under the offer of securities is five hundred million shillings or such other amounts as may be prescribed by the Authority; or

(ii)the securities are denominated in such an amount or currency as the Authority may prescribe,

shall, in lieu of an information memorandum, deliver to the Authority and securities exchange before the opening of such offer an information notice.

(2)The information notice shall be in the form set out in the Fifteenth Schedule.

31. Persons responsible for the information memorandum

(1)The persons who, for the purposes of these Regulations, are responsible for an information memorandum are—

(a)the issuer of the securities to which the information memorandum relates;

(b)where the issuer is a legal entity, each person who is a director or member of the relevant governing body of that legal entity at the time when the information memorandum is published;

(c)where the issuer is a legal entity, each person who has given consent to be named and is so named in the information memorandum as a director or member of the relevant governing body of that legal entity at the date of the information memorandum or at a specified time in the future;

(d)each person who accepts, and is stated in the information memorandum as having accepted, responsibility for any part of the information memorandum;

(e)the offeror of the securities, where the offeror is not the issuer;

(f)where the offeror is a body corporate, but is not the issuer and whether or not making the offer in association with the issuer, each person who is a director or member of the governing body of that body corporate at the time when the information memorandum is published; and

(g)any other person who has authorised the contents of, or any Part of, the information memorandum.

(2)Despite subregulation (1), a person shall not be responsible for an information memorandum—

(a)under subregulation (1) (a), (b) or (c), unless the issuer has made or authorized the offer in relation to which the information memorandum is published; or

(b)under subregulation (1) (b), if such information memorandum is published without that person’s knowledge or consent and on becoming aware of its publication, the person gives reasonable notice to the public and the Authority that the information memorandum was published without that person’s knowledge or consent.

(3)Where a person has accepted responsibility for, or authorised, part of the contents of an information memorandum, that person shall be responsible under subregulation (1) (d) or (g) only for that part and only if it is included substantially in the form and context that the person has agreed.

Part VI – TRANSACTION ADVISORS AND COMPLIANCE OFFICERS

32. Transaction advisors

(1)An entity proposing to offer securities to the public or list securities in any market segment shall appoint a transaction advisor.

(2)A transaction advisor shall take all reasonable and effective measures to avoid or deal with any conflicts of interest that may arise in the discharge of the transaction advisor’s duties.

(3)A person is not eligible for appointment as a transaction advisor unless such a person is an investment bank or an investment adviser licenced by the Authority.

(4)A transaction advisor appointed under subregulation (1) shall be responsible for ensuring that the offer of securities and listing is made in accordance with the Act and these Regulations.

33. Compliance officers

(1)An issuer shall, after the issuance or listing of the issuer’s securities, appoint, engage or designate a person to be the issuer’s compliance officer.

(2)A compliance officer shall—

(a)support the issuer to comply with the Act, these Regulations and any relevant written law during the period that the issuer’s securities are listed;

(b)review, before publication, all financial information announcements, and any other documentation to ensure that the announcements or documentation accurately disclose all material information to shareholders and the market;

(c)submit all required documents to the securities exchange and ensure that the documents comply with the continuing disclosure obligations;

(d)take all reasonable steps to brief the members of the board of directors of the issuer as to the nature of the directors’ responsibilities under the continuing disclosure obligations, other applicable regulations and general nature of the directors’ obligations in relation to holders of securities;

(e)ensure that all new appointments to the board of directors of the issuer are complete;

(f)ensure that the members of the board of directors of the issuer undertake training in corporate governance and the Directors Training Programme within six months after being appointed;

(g)attend all board audit committee meetings of the issuer in an advisory capacity to ensure that the issuer conducts its meetings in compliance with the continuing listing obligations; and

(h)carry out any activities relating to the issuer as may be requested by the securities exchange.

(3)Each transaction adviser and compliance officer shall, in the discharge of their responsibilities under these Regulations, observe due care and skill and ensure that they observe the highest level of integrity in their conduct and judgment.

Part VII – UNDERWRITING AND VALUATION OF SECURITIES

34. Underwriting of offers to the public

(1)Where an issuer decides to have its public offer underwritten, it shall disclose the underwriting arrangement to the Authority before entering into the arrangement.

(2)The issuer shall disclose the facts and particulars of the underwriting arrangement in the information memorandum.

(3)Where the underwriter is a person related or associated with the issuer, the underwriter shall undertake to the Authority to dispose of any securities arising from the underwriting agreement within a period determined by the issuer and approved by the Authority.

(4)The Authority may extend the period referred to in subregulation (3) if such extension is in the best interest of the holders of the securities of the issuer, having regard to the prevailing market conditions and any other factors that are relevant in the circumstances.

(5)Where the Authority extends the period in accordance with subregulation (4), the issuer shall publicly disclose the period of such extension, any conditions attached to the extension and the circumstances necessitating the extension, in the same manner as the information memorandum was published.

35. Valuation of securities

(1)A person who proposes to make a public offer may use a book-building process in accordance with the Sixteenth Schedule to determine the price of the securities.

(2)Despite subregulation (1), a person who proposes to make a public offer may also determine the price of the securities in accordance with International Valuation Standards.

(3)The issuer shall disclose to the Authority the valuation methodology used to determine the price of securities in a public offer at the time of the application to the Authority to issue the securities.

Part VIII – GREEN SHOE OPTION

36. Green Shoe options

(1)An issuer making a public offer of securities may provide green shoe option in order to benefit from the demand for the securities if there is an oversubscription or to stabilise the post-listing price of the securities:Provided that—

(a)the issuer has been authorized to include the green shoe option by a resolution passed in a duly constituted meeting of members of the issuer, which resolution shall specify the purpose for the green shoe option;

(b)the information memorandum shall contain all material disclosures about the green shoe option including the securities to be offered in the green shoe option which shall not exceed thirty per cent of the specified offer amount and the use of the proceeds of the green shoe option, in particular, the information memorandum shall contain the following additional disclosures where applicable—

(i)the maximum number of securities, in number and as a percentage of the proposed issue size, proposed to be over-allotted by the issuer;

(ii)the maximum increase in the equity share capital of the issuer and the shareholding pattern, post-issue, in case the issuer is required to allot further equity shares to the extent of over-allotment in the issue;

(iii)the maximum amount of funds to be received by the issuer in case of further allotment, and the use of the additional funds shall be disclosed in the offer document;

(iv)the name of the stabilizing agent;

(v)the period for which the issuer proposes to avail of the stabilization mechanism;

(vi)the details of the agreement or arrangement entered into by the stabilizing agent with the promoters or shareholders to borrow equity shares from the latter including the name of each promoter or shareholder, their existing shareholding in the issuer, the number and percentage of equity shares to be lent by them and other important terms and conditions including rights and obligations of each party; and

(vii)the number of equity shares to be allotted pursuant to the public issue, stating separately the number of equity shares to be borrowed from each promoter or shareholder and over-allotted by the stabilizing agent and the percentage of such equity shares in relation to the total issue size; and

(c)with respect to a green shoe option for the purposes of stabilizing the price—

(i)the issuer has appointed an investment bank or an underwriter as a stabilizing agent, who shall be responsible for the price stabilization process;

(ii)before lodging the offer documents with the Authority, the issuer and the stabilizing agent shall have entered into an agreement, stating the terms and conditions relating to the green shoe option including fees charged and expenses to be incurred by the stabilizing agent for discharging its responsibilities, and such agreement shall have been delivered to the Authority;

(iii)before lodging the offer documents with the Authority, the stabilizing agent shall have entered into an agreement with the promoters or pre-issue shareholders or both for borrowing specified securities from them in accordance with paragraph (vi);

(iv)the agreement shall specify the maximum number of specified securities that may be borrowed for the purpose of allotment or allocation of specified securities in excess of the issue size (over-allotment), which shall not exceed thirty per cent of the issue size;

(v)subject to paragraph (iii), the transaction adviser, in consultation with the stabilizing agent, shall determine the amount of specified securities to be over-allotted in the public issue;

(vi)in the case of an initial public offer pre-issue shareholders and promoters, and in case of a further public offer pre-issue shareholders holding more than five per cent of specified securities, and promoters may lend specified securities to the extent of the proposed over-allotment; and

(vii)the specified securities borrowed shall be in dematerialized form and allocation of the securities shall be made pro-rata to each successful applicant.

(2)For the purpose of the stabilization of the post-listing price of the securities, the stabilizing agent shall determine the relevant aspects including the timing of buying or selling such securities, quantity to be bought or sold and the price at which such securities may be bought or sold in the market.

(3)The stabilization process shall be available for a period of not more than thirty days from the date on which trading in the securities in the secondary market of the securities exchange commences.

(4)The stabilizing agent shall open a special account with a licensed bank for crediting any monies received for the over-allotment and a special account with a central depository agent for crediting specified securities to be bought from the market during the stabilization period out of the monies credited in the special bank account.

(5)On expiry of the stabilization period, if the stabilizing agent has not been able to buy specified securities from the market to the extent of such securities over-allotted, the issuer shall allot specified securities at issue price to the extent of the shortfall to the special account with the central depository agent.

(6)The allotment in subregulation (5) shall be done within five days after the date of the closure of the stabilization period.

(7)The specified securities referred to in subregulation (5) shall be returned to the promoters or pre-issue shareholders by the stabilizing agent in lieu of the specified securities borrowed from them and the account with the central depository agent shall be closed thereafter.

(8)The issuer shall make a listing application in respect of the further specified securities allotted under subregulation (9), to the relevant securities exchange where the specified securities allotted in the public issue are listed.

(9)The stabilizing agent shall remit the monies with respect to the specified securities allotted under subregulation (7) to the issuer from the special bank account.

(10)Any monies left in the special bank account after remittance of monies to the issuer under subregulation (11) and deduction of expenses incurred by the stabilizing agent for the stabilization process shall be transferred to the Investor Compensation Fund established under the Act and the special bank account shall be closed soon thereafter.

(11)The stabilizing agent shall submit a report to the securities exchange on a daily basis during the stabilization period and a final report to the Authority containing the following particulars—

(a)the name of the issuer;

(b)the name of the stabilizing agent;

(c)the issue size being number of equity shares;

(d)the issue open date;

(e)the issue closure date;

(f)over-allotment in issue expressed as a percentage;

(g)the date of commencement of trading;

(h)the amount in the Green Shoe Option Bank Account in shillings;

(i)the details of each promoter from whom shares were borrowed (name and number of shares borrowed);

(j)the date on which the stabilization period ended;

(k)the number of shares bought during the stabilization period;

(l)the date on which issuer allotted further shares to the extent of shortfall;

(m)the date when the shares were returned to each promoter;

(n)the date when the money in the Green Shoe Option Bank Account was remitted to the issuer;

(o)the details of the depository account (Special account for Green Shoe Option securities) where shares purchased from the market were kept including—

(i)the name of the central depository agent;

(ii)the account number;

(iii)the number of shares purchased and the dates of the purchases; and

(iv)the number of shares taken out and the date they were taken out;

(p)the details of amount transferred to the Investor Compensation Fund in shillings; and

(q)such other information as the Authority may require to be included in the report.

(12)The stabilizing agent shall maintain a register for at least three years from the date of the end of the stabilization period containing particulars including the price, date and time in respect of each transaction effected in the course of the stabilization process, the details of allotment made by the issuer on expiry of the stabilization process, and any other information that the Authority may prescribe.

(13)In this regulation, “stabilizing agent” means an entity, in most cases a transaction advisor, specifically appointed by the potential initial public offer issuer to stabilise post-initial-public-offer share prices by way of purchasing under-priced shares and selling overpriced shares.

Part IX – SHELF PROSPECTUSES

37. Issuing of shelf prospectuses

(1)An issuer who satisfies the criteria set out in regulation 38 may submit to the Authority a shelf prospectus for approval which shall indicate a period not exceeding two years as the period of validity of such prospectus commencing on the date of opening of the first offer of securities under the prospectus and, in respect of a second or subsequent offer of such securities issued during the period of validity of the prospectus, no further prospectus shall be required.

(2)An issuer who has submitted a shelf prospectus under subregulation (1) shall be required to publish a supplementary offering note containing all material changes in the business and financial position of the issuer occurring between the first offer of securities or the previous offer of securities and the succeeding offer of securities and such other changes as may be prescribed, within the prescribed time, prior to the issue of a second or subsequent offer of securities under the shelf prospectus:Provided that where an issuer or any other person has received an application for the allotment of securities and advance payments of subscription before the making of any such change, the issuer or that other person shall notify the changes to such an applicant and if the applicant notifies the issuer or that other person a desire to withdraw the application, the issuer or that other person shall refund the payments received as subscription within fifteen days after the notification.

(3)Where a supplementary offering note is published, each time an offer of securities is made under this regulation, the supplementary offering note and the shelf prospectus shall be deemed to be the shelf prospectus.

38. Qualification to issue shelf prospectuses

(1)A shelf prospectus published under regulation 37 may only be issued and published by a legal entity, whether listed or not—

(a)that has net assets of at least five hundred million shillings as at the date of the last audited balance sheet;

(b)that has a consistent track record of distributable profit for the preceding three years;

(c)that has no regulatory action pending against it before any regulatory authority including the Authority, Central Bank of Kenya or Insurance Regulatory Authority; and

(d)that is not in default of any material obligation including the payment of debts as they fall due and payment of dividends or repayment of any loans, and has not been in such default in the preceding three financial years.

(2)Each shelf prospectus shall comply with the disclosure requirements for public offers of securities for the relevant market segment under these Regulations.

(3)Not more than five issuances of securities may be made through a single shelf prospectus.

Part X – SPECIAL PURPOSE ACQUISITION COMPANIES

39. Incorporation status

(1)The special purpose acquisition company that intends to be listed shall be a body corporate that is duly incorporated or registered under the Laws of Kenya.

(2)A special purpose acquisition company shall not carry on any commercial or business operation before applying to the securities exchange for listing.

40. Qualitative and Quantitative criteria

(1)An issuer applying for listing of its equity securities on the Main Investment Market Segment or Small and Medium Enterprises Market Segment must be suitable for listing and is not permitted to adopt a dual class share structure at an initial public offer.

(2)In assessing the suitability of the special purpose acquisition company under subregulation (1), the Authority may take into account any relevant factor including—

(a)the business objective and strategy of the issuer;

(b)the profile including the track record and repute of the founding shareholders, and experience and expertise of the management team of the issuer;

(c)the alignment of interests of the founding shareholders and management team with the interests of other shareholders, including potential losses and returns to the founding shareholders and the management team, and other shareholders;

(d)the sufficiency of gross proceeds to be raised from the special purpose acquisition company initial public offering to undertake a business combination which will—

(i)enable the issuer to have an identifiable core business with sufficient size and scale; and

(ii)offer reasonable returns to shareholders based on the equity capital employed;

(e)the proportion of rewards to be enjoyed by the founding shareholders and management team as compared to the expected and timing of shareholder value creation;

(f)the quantum of discount to the special purpose acquisition company initial public offering issue price at which securities of the issuer are issued to the founding shareholders and the management team, if any;

(g)the intended use of the special purpose acquisition company initial public offering proceeds that have not been placed in the escrow account;

(h)the dilutive features and events which may impact shareholders, and whether there is any mitigation for such dilution; and

(i)the escrow arrangements governing the funds in the escrow account.

(3)For avoidance of doubt, the discount contemplated in subregulation (1)(f) shall not result in a price that is lower than the nominal value of the securities or a price lower than fifty per cent of the price of the securities issued to the other shareholders.

41. Special purpose acquisition company initial public offering proceeds and escrow requirements

(1)The issuer shall, immediately upon listing on the securities exchange, place at least ninety per cent of the gross funds raised from the initial public offer in an escrow account opened with and operated by an independent escrow agent and which is part of a financial institution licensed and approved by the Central Bank.

(2)The amount placed in the escrow account under subregulation (1) shall not be drawn down except for the purpose of the business combination, or liquidation of the issuer, or such other circumstances as specified in these Regulations.

(3)The escrow agent appointed under subregulation (1) shall be independent of the founding shareholders, management team, and associates of the founding shareholders and management team.

(4)The issuer shall secure and maintain the escrow arrangement at all times over the funds in the escrow account until the termination of the escrow account in accordance with subregulation (6).

(5)The issuer shall hold its assets in permitted investments until completion of a business combination that meets the Authority’s requirements.

(6)The escrow agreement governing the escrowed funds shall provide for—

(a)the termination of the escrow account and release of the escrowed funds on a pro rata basis to shareholders who exercise their redemption rights and the remaining escrowed funds to the issuer, if the issuer completes a business combination within the permitted time frame; and

(b)the termination of the escrow account and distribution of the escrowed funds to shareholders (other than the founding shareholders, management team, and associates of shareholders and management team in respect of all equity securities owned or acquired by them prior to or pursuant to the initial public offering).

(7)The special purpose acquisition company initial public offering proceeds that are not placed in the escrow account, and any interest or other income earned on the escrowed funds from permitted investments, may be applied—

(a)as payment for administrative expenses incurred by the issuer in connection with the initial public offer;

(b)for general working capital expenses; and

(c)for the purpose of identifying and completing a business combination.

(8)The issuer shall be required to account to the issuer’s shareholders and Authority on the use of the special purpose acquisition company initial public offering proceeds upon the completion of the business combination.

42. Issuer of convertible securities

Where any convertible securities are issued in connection with the special purpose acquisition company initial public offering, the securities shall comply with the following requirements—

(a)only one class of convertible securities shall be permitted at a time;

(b)the conversion price of the convertible securities shall not be lower than the price of the ordinary shares offered for the special purpose acquisition company initial public offering;

(c)the convertible securities are non-detachable from the ordinary shares and shall not be exercisable before the completion of the business combination;

(d)the convertible securities shall not have an entitlement to the funds held in the escrow account upon liquidation of the issuer or redemption of the ordinary shares by shareholders who have voted against the business combination; and

(e)the tenure of the convertible securities shall expire on the earlier of the maximum tenure under the issuance terms as stated in the prospectus issued in connection with the issuer’s special purpose acquisition company initial public offering or permitted time frame for completion of a business combination where no business combination is completed within such time period.

43. Authority may permit issuer to raise additional funds

(1)The Authority may, before the completion of a business combination, permit the issuer to raise additional funds through the issue of securities where—

(a)the issuance is made on a pro rata basis and in accordance with the requirements of this Part;

(b)at least ninety per cent of the gross proceeds raised are placed in escrow; and

(c)the proceeds raised are for the purpose of financing the business combination or related administrative expenses:

Provided that the special purpose acquisition vehicle’s intention to raise additional funds shall be disclosed in the information memorandum at the time of listing or, if not disclosed, the special purpose acquisition vehicle obtains approval from the shareholders to raise additional funds.

(2)The issuer shall not be permitted to obtain any form of debt financing other than those simultaneous with or after completion of its business combination:Provided that the—

(a)funds in the escrow account shall not be used as collateral or subject to encumbrance for the debt financing; and

(b)funds drawn down from the debt financing shall be applied towards the financing of the business combination or related expenses.

(3)A credit facility may be entered into before the completion of a business combination and, if so entered into, shall be drawn down simultaneously with, or after completion of, a business combination.

(4)For the purposes of this regulation, “debt financing” does not include short term trade or accounts payables in the ordinary course of business.

44. Security-based compensation arrangements not permitted

The Authority shall not permit the issuer to adopt any security-based compensation arrangement prior to the completion of a business combination.

45. Additional continuing listing requirements before completion of business combination

(1)The issuer shall be required to complete a business combination within twenty-four months from the date of listing of the special purpose acquisition company initial public offering.

(2)Where the business combination comprises of more than one acquisition, the issuer shall be required to complete the acquisitions simultaneously on or around the same day, and each of the acquisitions shall be in separate and inter-conditional resolutions.

(3)A business combination under this regulation may be in the form of a merger, share exchange, asset acquisition, share purchase, reorganization, or such other similar business combination, in accordance with the business strategy and acquisition mandate disclosed in the prospectus issued in relation to the special purpose acquisition company initial public offer.

(4)The issuer may apply to the Authority for an extension of time, which may not exceed twelve months, to complete the business combination and specifically obtain the approval of a majority of at least seventy-five per cent of the votes cast by independent shareholders at a general meeting to be convened.

(5)An extension of time under subregulation (4) may be permitted under exceptional circumstances and any application for the extension of time shall be submitted to the Authority at least one month before the expiry of the permitted time frame.

(6)For the purpose of voting on the extension of time to complete the business combination, the founding shareholders, the management team, and their associates, shall not be considered to be independent of one another.

(7)The Authority may reject an application for extension of time if the Authority determines that there is no reasonable justification for the application or it is in the interests of the public to do so.

(8)The initial business or asset acquired pursuant to the business combination shall have a fair market value of at least eighty per cent of the amount in the escrow account at the time of entry into the binding agreement for the business combination transaction, but shall not include any amount held in the escrow account representing deferred underwriting fees and any taxes payable on the income earned on the escrowed funds.

46. Multiple concurrent acquisitions or mergers

Where the special purpose acquisition company concludes multiple concurrent acquisitions or mergers as part of the business combination, there must be at least one initial acquisition which satisfies the requirement of having a fair market value constituting at least eighty per cent of the amount held in the escrow account at the time of entry into the binding agreements for the business combination transactions, and such concurrent transactions must be inter-conditional and completed simultaneously within the permitted time frame.

47. Issuer to appoint advisors and valuers

(1)The issuer shall appoint—

(a)a transaction advisor, who is an issue manager, to advise on the business combination; and

(b)a competent and independent valuer to value the business or asset to be acquired under the business combination.

(2)A valuation under subregulation (10)(b) shall be conducted in accordance with International Valuation Standards and a summary valuation report shall be included in the shareholders’ circular in relation to the business combination.

48. Business combination to result in identifiable core business

(1)The business combination shall result in the issuer having an identifiable core business of which it has a majority ownership or management control.

(2)The Authority may consider a business combination involving an acquisition of a minority stake in the business or asset, where the issuer can demonstrate that it has management control of such business or asset.

(3)The business combination must be respectively approved by a majority of independent directors, and an ordinary resolution passed by independent shareholders at a general meeting to be convened.

(4)For the purpose of voting on the business combination under subregulation (3), the founding shareholders, management team, and their associates, shall not considered to be independent of each other.

(5)The shareholders’ circular in relation to the business combination must contain an opinion from an independent financial adviser stating that the terms of the transaction are on normal commercial terms and are not prejudicial to the interest of the issuer and its minority shareholders.

(6)Each independent shareholder (other than the founding shareholders, the management team, and their respective associates and independent shareholders who vote for the business combination) voting against the business combination shall be entitled to redeem their ordinary shares, on a pro rata basis, of the amount in the escrow account at the time of the business combination vote, provided that the business combination is approved and completed within the permitted time frame.

(7)The redemption amounts with respect to the shares to be redeemed pursuant to subregulation (6) shall be paid to the electing independent shareholder as soon as practicable upon completion of the business combination, and shares tendered in exchange for cash shall be cancelled.

(8)Any convertible securities attached to redeemed shares shall cease and become null and void.

49. Business combinations

(1)Before completion of the business combination, in the event a material change occurs in relation to the profile of the founding shareholders or the management team which may be critical to the successful founding of the issuer or successful completion of the business combination, the issuer shall seek approval of a majority of at least seventy-five per cent of the votes cast by independent shareholders at a general meeting to be convened for the continued listing of the issuer on the Securities Exchange.

(2)For the purpose of voting on the continued listing of the issuer under subregulation (1), the founding shareholders, management team, and their associates, shall not be considered to be independent of each other.

(3)The Authority may declare a circumstance to be a material change under this regulation.

(4)The issuer shall be liquidated where it—

(a)fails to complete a business combination within the permitted time frame;

(b)fails to obtain specific shareholders’ approval; or

(c)is directed to delist by the Authority before the completion of a business combination.

(5)The amount held in the escrow account at the time of the liquidation distribution and such other accounts held by the issuer, net of taxes payable and direct expenses related to the liquidation distribution, shall be distributed to shareholders on a pro rata basis as soon as practicable, as permissible by the relevant laws and regulations.

(6)Any interest, income derived and deferred underwriting commissions accrued in the escrow account will form part of the liquidation distribution.

(7)The founding shareholders, management team, and their associates shall waive their right to participate equally in the liquidation distribution in respect of all equity securities owned or acquired by them prior to or pursuant to the special purpose acquisition company initial public offering and shall only be entitled to participate in such distribution only after the other shareholders have received their relevant share of the liquidation proceed.

(8)The underwriters of the special purpose acquisition company initial public offering shall waive their rights to any deferred underwriting commissions deposited in the escrow account in the event the issuer liquidates prior to completion of the business combination.

50. Liquidation of special purpose acquisition companies

The Authority shall order the delisting of the issuer’s securities on or about the date on which the liquidation distribution is completed where the issuer fails to—

(a)complete a business combination within the permitted time frame; or

(b)obtain specific shareholders’ approvals.

51. Delisting of special purpose acquisition companies for failure to complete business combinations

The Authority shall determine whether the continued listing of the resulting issuer after completion of the business combination will be in the best interests of the Authority, securities exchange and public, and may suspend, direct the commencement of the liquidation distribution and delist the issuer’s securities before the completion of the business combination.

52. Authority to consider whether continued listing is in the best interest of the authority and public

Where a special purpose acquisition company seeks to list on a securities exchange, or is seeking shareholders’ approval for a business combination, the offering memorandum or the introductory document or the shareholders’ circular shall comply with the disclosure requirements as may be prescribed by the Authority.

53. Continuing obligations for special purpose acquisition companies

The continuing obligations set out in the Thirteenth Schedule shall apply to a special purpose acquisition company issuer after the date of the business combination.

Part XI – SHARE BUYBACKS

54. Scope

(1)This Part sets out the requirements that apply to a listed company that intends to undertake a share buyback.

(2)A listed company that intends to buy back its shares shall comply in full with the provisions of the Companies Act (Cap. 486), Capital Markets Act (Cap. 485A) and these Regulations.

55. Listed company may buy back shares

(1)A listed company may only buy back its shares if the Articles of Association of the listed company provide for share buybacks.

(2)A proposal to buy back the shares of a listed company shall be recommended by a resolution of the board of directors and approved by a resolution of shareholders of the company in a general meeting of shareholders before the share buyback is undertaken.

(3)A proposal to the company’s shareholders to buy back shares under subregulation (2) shall be through a circular which shall specify the terms and conditions of the proposal

(4)The circular shall satisfy the following conditions before it is circulated to shareholders—

(a)it shall have been approved by the Authority in accordance with these Regulations; and

(b)it shall have been submitted to the securities exchange on which the share buyback transactions shall be undertaken.

56. Shareholders’ resolution

A shareholders’ resolution regarding a share buy-back proposal shall specify—

(a)the number of shares or percentage of shares, and description and classes of the shares which the listed company has been authorised to buy back;

(b)the dates on which the authority conferred by the shareholders’ resolution shall commence and expire;

(c)the maximum funds to be allocated by the listed company for the share buy-back or the basis, other than reference to any person’s discretion or opinion, or formula for determining the maximum funds that are to be allocated;

(d)whether the shares are proposed to be cancelled or retained as treasury shares, or both and, if available, information as to the percentage or number of shares purchased which are to be retained or cancelled; and

(e)whether the shares will be bought back off-market or onmarket.

57. Shareholders’ circular

(1)The shareholders’ circular on a share buy-back proposal shall disclose all material information that the shareholders of the listed company and the shareholders’ professional advisers would reasonably require or expect to be informed about in order to make an informed decision on the proposed share buy-back transaction.

(2)Despite the generality of subparagraph (1), the shareholders’ circular shall contain the following information—

(a)a heading drawing attention to the importance of the circular and advising holders of shares to consult appropriate independent advisers regarding the proposal;

(b)a statement that the Authority or securities exchange, as the case may be, is not responsible for the contents of the circular, makes no representation as to the accuracy or completeness of the circular, and is not liable for any loss howsoever arising from or in reliance on the whole or any Part of the contents of the circular;

(c)the reasons for the share buyback;

(d)the class and number of shares that are intended to be bought back;

(e)the method of undertaking the share buy-back including whether or not the buy-back shall be undertaken—

(i)through open market repurchase programmes executed through tender offers or over a period of time; or

(ii)through on-market (exchange) or off-market purchases;

(f)the treatment by the listed company of the shares to be bought back including—

(i)whether or not the shares bought back shall be held in treasury or shall be cancelled; and

(ii)where the shares that have been bought back are intended to be held in treasury, the listed company shall disclose the current and future treatment of those treasury shares;

(g)the price-per-share intended to be paid by the listed company, specifying the maximum and minimum prices of the shares, and a detailed explanation supporting the prescribed price including valuation reports;

(h)the mode of financing the share buyback either being the proceeds from a fresh issue of shares or out of distributable profits of the listed company;

(i)whether or not consent for the share buyback has been obtained from other relevant parties including bondholders, regulators and creditors;

(j)a declaration by the directors regarding the company’s solvency or liquidity, based on the company’s latest audited financial statements, that is sufficient to undertake the share buy-back including a statement that on the date of the shareholder circular—

(i)the assets of the listed company are fairly valued;

(ii)the assets of the listed company are equal to or exceed the liabilities of the listed company; and

(iii)the listed company shall be able to pay its debts as they come due in the ordinary course of business for a period of twelve months following the share buyback;

(k)the potential impact of the proposed share buyback on the shareholding structure of the listed company;

(l)the risk factors and assumptions of the share buyback transaction;

(m)any related party transaction or director’s interest in the share buyback transaction;

(n)the impact of the share buyback on the listed company’s financial position;

(o)the number of shares held directly and indirectly by the directors and substantial shareholders;

(p)the direct and indirect interests of the directors and major shareholders and any person connected with the directors or major shareholders in the proposed purchase of shares or resale of treasury shares;

(q)the potential advantages and disadvantages of the proposed share buyback to the listed company and its shareholders;

(r)a statement by the board of directors that the proposal is in the best interest of the listed company and reasons thereof;

(s)the period during which the shareholders’ approval for the share buyback shall be valid; and

(t)any other relevant information regarding the proposed share buyback transaction.

58. Off-market purchases to be approved by Authority

If a listed company intends to buy back its shares through off-market purchases, that company shall submit to the Authority for approval—

(a)the draft share buyback contract in line with the requirements for private transactions; and

(b)the shareholders’ circular.

59. Publication of notices

(1)A listed company that intends to buy back its shares shall publish, within twenty-four hours after the board’s resolution approving the share buy-back, and with the approval of the Authority, a public announcement of the intended share buyback in accordance with Part XIV of these Regulations.

(2)The listed company shall submit the published public announcement to the securities exchange and the exchange shall publish the announcement on its website.

(3)The announcement under subregulation (1) shall contain material information on the share buyback including—

(a)the method of effecting the share buyback (on-market (exchange) purchase or off-market purchase);

(b)the minimum and maximum prices of the shares to be bought back;

(c)the treatment of shares by the listed company after they are bought back;

(d)the percentage of the shares to be bought back as a proportion of the issued share capital of the listed company; and

(e)the transaction advisers advising the listed company in the share buyback transaction.

(4)The announcement under subregulation (1) shall contain a statement that the listed company shall provide the shareholders with a circular on the proposed share buyback seeking the shareholders’ approval after the circular on the share buy-back has been approved by the Authority.

60. On-market (exchange) purchases

If a listed company intends to buy back its shares through on-market (exchange) purchases—

(a)the maximum share buyback price of the shares to be purchased shall be ten per cent above the weighted price average of the shares during the period of thirty days before the day of the board resolution approving the share buyback; and

(b)the minimum share buyback price of the shares to be purchased shall be the nominal price of the shares or the prevailing market price, whichever is higher, on the date of the board resolution approving the share buyback.

61. Minimum capital and free float requirement

A proposal by a listed company to buy back its shares shall not reduce or contravene the minimum capital and free float requirement for continued listing of the company in the respective market segment under these Regulations and any other additional free float requirements that may be introduced by the Authority.

62. Class of shares and treatment of treasury shares

(1)If a proposal to buy back shares relates to a class of shares of the listed company, the shares to be bought back by the company shall not exceed ten per cent of the total issued shares of that class in a given financial year:Provided that the Authority may waive this limit on the written application of the listed company.

(2)If a listed company opts to keep the shares bought back in treasury, the treasury shares shall not exceed ten per cent of the total issued shares of that class.

(3)Where a listed company proposes to sell treasury shares, including any transfer to an employee share ownership scheme of the company, the company shall, before selling or transferring the treasury shares, seek the approval of the company’s shareholders and Authority in accordance with these Regulations.

63. Volume of shares to be purchased in a share buy-back transaction

(1)The volume of the shares bought back by a listed company on any single day in a share buy-back transaction shall not exceed twenty-five per cent of the total trading volume of the issuer or such other limit as may be prescribed by the Authority by notice.

(2)The limit prescribed under subregulation (1)—

(a)shall be based on the liquidity of the shares in the market of the average daily trading volume for the four calendar weeks preceding the week of the purchase; and

(b)shall not be executed as to significantly adversely affect the liquidity of the shares in question.

(3)The share buyback shall not be effected during the pre-open session of the trading of the shares of the listed company.

64. Disclosure to the securities exchange

(1)A listed company that undertakes a share buy-back shall disclose to the securities exchange the details of the buy-back transaction immediately after buying back the shares and such disclosure shall be published on the security exchange’s website.

(2)The disclosure under subregulation (1) shall include information on the listed company, number of shares that have been bought back, price per share of the shares that have been bought back, and percentage of the free float after the shares have been bought back.

65. Duration of buyback programme

A listed company shall—

(a)complete the share buyback within eighteen months from the date of the shareholder resolution approving the share buyback proposal; and

(b)separate share buyback programmes by a period of twelve months.

66. Appointment of stockbrokers

(1)A listed company intending to purchase its own shares or resell treasury shares on the securities exchange may appoint one or more stockbrokers for that purpose.

(2)The listed company must ensure that all dealings in the company’s shares or treasury shares are made through the stockbrokers appointed under subregulation (1).

(3)A listed company shall lodge a notice of the appointment of the stockbrokers concerned with the securities exchange immediately and open one securities account in the company’s name with such stockbrokers which shall be designated as “Share Buyback Account” used solely for the purchase of the company’s own shares or resale of treasury shares.

67. Prohibition, cancellation or suspension

(1)A listed company shall not undertake a share buyback transaction—

(a)during the period of fourteen days before the publication of the company’s half-yearly or annual financial statements; or

(b)after it has become aware of any material information which has not been made public which, if disclosed, could affect the price of the company’s shares.

(2)A share buyback transaction may be cancelled or suspended if—

(a)material information is announced during the period of fourteen days before the buyback being conducted; or

(b)if the listed company deems it fit in the circumstances.

(3)The cancellation or suspension of a buyback transaction shall be done within a reasonable time before the effective date of the buyback transaction.

68. Reporting and disclosures

(1)A listed company that undertakes a share buy-back transaction shall submit to the Authority or securities exchange, as the case may be, once in each day a report on the share buy-back transaction undertaken during that day and the treatment of the shares acquired by the listed company including a report on the price and volume of shares bought back, treasury shares sold and cancellation of the shares, where applicable.

(2)A listed company that undertakes a share buyback transaction shall disclose in its annual report any share buyback transaction undertaken in the year to which the report relates and the treatment by the company of the shares bought back.

69. De-listing and conversion to private company

If, after a share buy-back, the listed company that buys back its shares proposes to de-list its shares from the securities exchange or the company is converted to a private company—

(a)the directors of the listed company and any person acting in concert with the directors shall not be considered to be independent and shall not be entitled to vote at the meeting of shareholders convened to approve the share buyback proposal; and

(b)the share buyback proposal shall require to be approved by—

(i)at least seventy-five per cent of the votes attached to the shares owned by independent shareholders that are cast, whether in person or by proxy, at a duly convened general meeting; and

(ii)the number of votes cast against the resolution shall not be more than ten per cent of the votes attached to the shares owned by independent shareholders.

70. Takeovers and mergers

If a share buy-back transaction triggers the percentage shareholding limits that may lead to a takeover of the listed company, the Capital Markets (Takeovers and Mergers) Regulations, 2002, shall apply.

71. Compliance with applicable laws and Regulations

(1)A listed company shall comply with the corporate governance requirements, listing obligations and all relevant written laws and Regulations of Kenya as may be applicable during the share buyback process.

(2)A listed company undertaking a share buyback shall ensure that it, its directors, shareholders, connected persons, and persons acting in concert with the company or its directors, do not commit any offences relating to market abuse or insider dealing during the share buyback.

Part XII – TRADING HALT, SUSPENSION AND DELISTING

72. Trading halt

(1)A securities exchange may, at any time, with the approval of the Authority, grant a trading halt or suspend trading of the listed securities of an issuer.

(2)A trading halt or suspension of trading of listed securities may also be granted at the request of the issuer or at the direction of the Authority:Provided that where the request is made by the issuer, the securities exchange shall not be obligated to honour the request.

(3)A trading halt—

(a)shall not exceed one trading session at any one time; and

(b)may, with the approval of the Authority, be changed to a suspension by a securities exchange at any time.

(4)A securities exchange shall, at the written direction of the Authority, halt or suspend the trading of all securities on the market or close the market before the normal close of the trading session.

73. Suspension

(1)No security shall be suspended or de-listed by a securities exchange without the prior written approval of the Authority.

(2)The Authority may, in writing, require a securities exchange to suspend the trading in a listed security where—

(a)a decision has been made or is imminent that will lead to the placing of the issuer of such securities under statutory management, receivership, liquidation or voluntary winding up;

(b)there is a significant restructuring involving the listed securities including a restructuring during the process of an acquisition, merger or takeover;

(c)a recommendation has been made by the directors to the shareholders to have the securities suspended and where the holders of such securities through a special resolution at which a minimum of seventy-five per cent of such security holders are represented without objection to the proposed suspension from at least ten per cent of the holders of securities resolve to have the securities suspended; or

(d)the issuer is in material default of the issuer’s continuing listing obligations.

(3)The suspension of securities shall be for such period as the Authority may approve or direct.

(4)During the period of the suspension, the issuer shall continue to comply with the continuous listing obligations and relevant rules of the securities exchange on which the issuer is listed.

74. Delisting

(1)The Authority may require a securities exchange to de-list a security where—

(a)the issuer of such securities has been placed under statutory management, receivership or liquidation or voluntary winding up;

(b)the issuer of such securities has continued to be in material default of continuing listing obligations for at least one year following suspension from trading of its securities;

(c)as a result of restructuring involving the listed securities, the issuer ceases to exist; or

(d)a recommendation has been made by the directors to the shareholders to have the securities delisted and where the shareholders of such securities through a special resolution at which a minimum of seventy-five per cent of such security holders are represented without objection to the proposed de listing from at least ten per cent of the holders of securities resolve to have the securities delisted.

(2)Despite the provisions of subregulations 72 and 73, the Authority may require the suspension or delisting of an issuer in any other circumstances, which in the opinion of the Authority, is for the protection of the interests of investors.

(3)Where a security has been suspended or de-listed, the securities exchange shall publish such information on its website and in such other manner as the Authority may direct.

(4)The suspension or de listing of a security shall not —

(a)absolve an issuer, the issuer’s directors or officers from any liability for any default which may have led to such suspension or delisting; or

(b)terminate any proceedings against such issuer, directors or officers commenced before the suspension or delisting.

75. Resumption proposals

(1)If the trading of the listed securities of an issuer is suspended under regulation 73, the issuer shall—

(a)submit to the Authority a resumption proposal with a view to resuming trading in the securities within twelve months after the date of suspension; and

(b)implement the resumption proposals within three months from the date the Authority indicates that it has no objection to the resumption proposals.

(2)If no resumption proposals have been submitted to the Authority to enable trading to resume within twelve months after the date of suspension, the securities exchange may delist the issuer upon approval by the Authority.

(3)If the resumption proposals have not been implemented within the six months specified in subregulation (1)(b), the securities exchange may de list the issuer upon approval by the Authority.

(4)This regulation shall not apply to suspension arising from regulation 73(2)(b).

76. Exit offer in de listing

If an issuer seeks to delist its securities from a securities exchange—

(a)the issuer shall make an exit offer to the issuer's minority shareholders and holders of any other classes of listed securities to be de listed to ensure that investors who purchased and held securities on the basis of the listing are not prejudiced by being compelled to hold unlisted securities which shall—

(i)be fair and reasonable; and

(ii)include a cash alternative as the default alternative; and

(b)the issuer shall appoint an independent transaction advisor to advise on the exit offer and the advisor shall give an opinion on whether or not the exit offer is fair and reasonable.

77. Recovery list

(1)A securities exchange may place an issuer on the recovery list on the direction or approval of the Authority if the issuer fails to meet any of the continuing listing obligations or for any other reason which, in the opinion of the Authority, is likely to prejudice the interests of the investors or market integrity.

(2)The issuer placed on the recovery list under subregulation (1) shall have the right to be heard by the Authority and securities exchange on which it is listed before being placed on the recovery list.

(3)On the depletion of shareholder funds resulting in a net liability position for the third and subsequent consecutive financial year based on audited full-year consolidated financial statements, an issuer shall be required to announce the fact through its website and in at least one newspaper with national circulation and provide the information prescribed by the Authority.

(4)Subregulation (3) shall not apply to an issuer that has been placed on the recovery list.

(5)If an issuer is placed on the recovery list, it shall—

(a)immediately announce the fact through its website and in a daily newspaper with nationwide circulation;

(b)within the prescribed time after being placed on the recovery list, provide a restructuring plan approved by its members to the Authority and the securities exchange on which it is listed;

(c)implement the restructuring plan within the prescribed time following the submission to the Authority and securities exchange; and

(d)for the period during which it remains on the recovery list, provide the market, including the Authority and securities exchange on which it is listed, with an update once in every three months on its efforts and progress made in meeting the exit criteria of the recovery list, including its financial situation, future direction, level of compliance with the continuing obligations or other material development that may have a significant impact on its compliance position:

Provided that if any material development occurs between one update and the next, the issuer shall immediately announce that development in the manner prescribed in paragraph (a).

(6)An issuer on the recovery list may apply to the Authority to be removed from the recovery list if it complies with net assets and solvency requirements or such other requirements as may have been imposed by the Authority.

(7)An issuer that fails to meet the requirements of sub regulation (4) within twenty-four months after the date on which it was placed on the recovery list, the securities exchange may—

(a)delist the issuer; or

(b)suspend trading of the listed securities of the issuer with a view to de listing the issuer.

(8)During the period an issuer remains on the recovery list, trading in its securities shall continue, unless a trading halt or a suspension is, or has been, effected.

78. Rules for the administration of the recovery list

A securities exchange shall prepare and submit to the Authority for approval the rules for the administration of the recovery list maintained by the securities exchange pursuant to this Part including rules on the setting up of a recovery board on which securities of issuers which are on the recovery list may be traded.

Part XIII – PUBLIC ANNOUNCEMENTS, CIRCULARS AND ELECTRONIC COMMUNICATIONS

79. Submission of circulars for approval

Where an issuer proposes to issue a circular to its shareholders or to the public in relation to an issue of securities or a transaction where shareholder approval is required, the issuer shall submit a draft of the circular to the Authority for approval.

80. Review of circulars

(1)A circular submitted to the Authority for approval shall not be circulated or made available publicly until the Authority advises that it has no objection to the issuance of the circular.

(2)Each public announcement and advertisement to holders of securities or the public shall be factual and shall be submitted to the Authority or the securities exchange, where applicable, for approval before distribution or publication:Provided that the Authority or the securities exchange, where applicable, may require the inclusion of such additional information which in is relevant to the shareholders, investors or public.

(3)The Authority, in lieu of the approval required under subregulations (1) and (2), may issue a circular prescribing the minimum content to be provided by an issuer for purposes of any relevant circular, public announcement or advertisement to be made to the shareholders, investors or public.

(4)An announcement or advertisement made or issued under subregulation (3) shall, on publication, be submitted simultaneously to the Authority.

81. Content of circulars

Each circular sent by an issuer to holders of its securities or the public shall—

(a)contain the information necessary to allow the holders of the securities to make an informed decision or to be properly informed;

(b)advise holders of securities that if they are in any doubt as to any action they should take, they should consult independent advisers;

(c)state that the Authority and securities exchange are not responsible for the accuracy of statements or opinions made or reports contained in the circular; and

(d)comply with specific requirements regarding circulars prescribed in these Regulations.

82. Electronic communications

(1)An issuer may send documents, including notices, circulars and annual reports, using electronic communications to a holder of its securities if there is express consent from the holder of the secuities or if the Articles of Association or the constitution or issue documents of an issuer permit.

(2)In this regulation, “electronic communications” includes the transmission of any communication through electronic and telecommunications media including websites, email and text messaging.

83. e-IPOs.

(1)The Authority may permit the issuance by an issuer and the subscription of securities in a public offer through electronic means.

(2)A public offer under subregulation (1) may include the issuance of electronic information memorandum and subscription of securities through electronic means whether or not on a first-come firstserved basis of subscription and allocation until the available securities are fully subscribed or purchased.

(3)A public offer under this regulation shall comply, with necessary modification, with the provisions relating to public offers set out in these Regulations.

Part XIV – TRANSACTIONS OF LISTED SECURITIES OUTSIDE A SECURITIES EXCHANGE

84. Nature of transactions

An application to the Authority for approval of a private transaction shall be considered if the transaction is for the—

(a)the transfer in the form of a gift;

(b)a settlement of a will or estate of a deceased person;

(c)restructuring, merger or acquisition in a scheme which has been approved by the Authority;

(d)the transfer of an exceptional nature of a listed security that the Authority considers to be proper and acceptable with respect to a strategic investor and serves the investor or public interest; or

(e)the transfer shall not result in any change in beneficial ownership otherwise than for purposes of paragraphs (c) or (d) or section 31(1A)(ii) of the Act.

85. Brokerage commissions

Where a private transaction has been authorized no brokerage commission shall be payable on the transaction, except a fee prescribed by the Authority:Provided that a private transfer under regulation 84 (a) shall be subject to the prevailing prescribed brokerage commission.

86. Approval of a private transaction

(1)Where it is intended to effect a private transaction of a listed security under regulation 84 (a), (b) or (e), a central depository agent representing the proposed transferee, shall assess, endorse and submit a written application with the required information and supporting documents to the Central Depository where the securities held.

(2)Where an application is made under regulation 84 (a) or (b), the central depository, shall notify the central depository agent within seven days after receiving the application whether the central depository objects to the private transaction or not, after examining and satisfying itself that the proposed transfer is eligible for consideration as a private transaction in accordance with these Regulations.

(3)The securities exchange or central depository, as the case may be, shall, upon determination of any application made under regulation 84 (a), (b) or (e), approve and simultaneously notify the Authority that the application complies with regulation 84 (a), (b) or (e).

(4)A private transfer application emanating from a change of custodian or fund manager shall be approved by the Central depository, in the case of equities and corporate debt securities and the securities exchange in the case of government debt securities.

(5)The securities exchange and central depository shall jointly submit to the Authority, guidelines for approval in respect of the processing requirements of a private transfer under regulation 84 (a) and (b).

(6)The guidelines stipulated under subregulation (5) shall apply to all stockbrokers.

(7)The Authority may delegate to a securities exchange the approval of private transactions.

87. Approval fees

The approval fee for any transaction of a listed securities outside a securities exchange shall be at the rate prescribed by the Authority.

88. Private transactions

(1)With respect to an application for approval of a private transaction, falling under regulation 84 (c) or (d) or section 31 (1A) (ii) of the Act, the applicant shall submit to the Authority for approval a detailed draft information memorandum or a circular to be published containing information on—

(a)the name and address of the applicant;

(b)the date of incorporation;

(c)the particulars of core activities, directors, management and major shareholders;

(d)the details of any agreements entered or proposed to be entered into and the cost;

(e)a statement by the transaction adviser managing the transaction that to the best of its knowledge and belief the application constitutes full and true disclosure of all material facts about the offer and issuer and where appropriate it has satisfied itself that the profit forecasts have been stated by the directors after due and careful inquiry;

(f)the details of any proposed merger, takeover, acquisitions, share swap, reorganization or restructure scheme and the relevant shareholders or board resolutions;

(g)a declaration by the directors of the applicant in the following form—

“This application has been approved by the directors of the company all of whom jointly and severally accept responsibility for the accuracy of the information given and confirm that after making all reasonable inquiries and to the best of their knowledge and belief, there are no facts the omission of which would make any statement herein misleading”; and

(h)any other matters as may be required by the Authority.

(2)The applicant shall make a public announcement of its intention to apply to the Authority for approval of the proposed transfer and reasons therein and a copy of the transfer form for the proposed transaction shall be submitted to the Authority together with the application.

Part XV – CONTINUING OBLIGATIONS

89. Continuing obligations.

(1)Each issuer whose securities have been offered to the public, including special purpose acquisition vehicles, and listed on any market segment shall comply with the continuing obligations specified in the Thirteenth Schedule.

(2)In relation to the continuing obligation to disclose information, an issuer shall make immediate public disclosure of information which might reasonably be expected to have a material effect on market activity and the price of its securities.

(3)Subregulation (2) shall not apply to information which would be a breach of law or contractual obligation not to disclose or meets any of the following conditions—

(a)information is of confidential nature;

(b)the information concerns an incomplete proposal or negotiation or matters of supposition or which is insufficiently definite to warrant disclosure;

(c)information is for internal management purposes; or

(d)the information is a trade secret:

Provided such information will be made available for review by the Authority to enable it to determine the extent to which it meets the foregoing criteria for exemption.

(4)The information required to be disclosed under these Regulations shall be disclosed within twenty-four hours after the event simultaneously to the Authority, the securities exchange at which the issuer’s securities are listed, if applicable, and to the public during non-trading hours of the relevant market segment.

(5)The announcement shall state whether the consent of the Authority or securities exchange or other person is necessary and where necessary, the issuer shall apply for such consent.

(6)An issuer shall publish, by way of a cautionary announcement, information which could lead to material movements in the ruling price of its securities if at any time the necessary degree of confidentiality cannot be maintained, or that confidentiality has or may have been breached.

(7)An issuer who fails to comply with any continuing obligation within the prescribed time shall be liable to pay a default fine at the rate prescribed by the Authority for the continuing time of default, such fine to be imposed notwithstanding that the Authority may have on request, extended time for compliance.

Part XVI – LISTING FEES AND OTHER CHARGES

90. Listing fees

Each issuer shall pay—

(a)to the Authority such fees and charges as prescribed in Part A of the Seventeenth Schedule; and

(b)to the securities exchange such fees and charges as prescribed in Part B of the Seventeenth Schedule.

91. Waiver of fees

The Authority or securities exchange may waive any fee or charges or part thereof.

Part XVII – REPEAL AND TRANSITIONAL PROVISIONS

92. Revocation

The Capital Markets (Securities) (Public Offers, Listings and Disclosures) Regulations, 2002 are revoked.

93. Other transitional provisions

Securities listed or approved for listing on the Alternative Investment Market Segment of the Nairobi Securities Exchange at the date these Regulations become effective shall—

(a)if the issuers qualify to be listed on the main investment market segment, transition to the main investment market segment, or at their discretion to be communicated within ninety days, to small and medium enterprises market segment; or

(b)if the Issuers do not qualify to be listed on the main investment market segment, transition to the small and medium enterprises market segment.

94. Fixed income securities transition

Securities listed or approved for listing on the Fixed Income Securities Market Segment of the securities exchange at the date these Regulations become effective shall—

(a)if the issue value was more than four hundred million shillings be listed on the Fixed Income Securities Market Segment; or

(b)if the issue value was for less than four hundred million shillings be listed on the Small and Medium Enterprise Fixed Income Securities Market Segment.

95. Savings provisions

Any application for approvals for offers, listing or any corporate action which has been commenced but for which no approval has been obtained before the effective dates shall be assessed under the Capital Markets (Securities) (Public Offers, Listings and Disclosures) Regulations, 2002.

96. Alignment of other rules

A securities exchange shall amend its listing, trading or any rules in place governing trading of securities in its exchange to align with these Regulations and submit them for approval by the Authority not later than ninety days from the effective date of these Regulations.

97. Compliance with requirements on compliance officer

Every issuer of securities shall comply with the requirement to appoint or designate a compliance officer within one year of the effective date of these Regulations.

Source: Kenya Law · Imported 4 October 2026