Kenyan CMA to Require Companies to Buy out Small Investors Before Delisting

Majority shareholders of firms looking to delist from the Nairobi Securities Exchange (NSE) will now be required to make cash offers to buy out small investors in measures meant to protect them from being locked in unlisted companies.

While most of the delistings at the NSE have come after buyouts where minority shareholders were offered a chance to sell up, current Capital Markets Authority (CMA) regulations provide a window for firms with large anchor shareholders acting in concert to delist without having to buy out their minority peers.

Kenya's securities law says that a delisting resolution can be passed by a simple majority at a meeting where shareholders with a combined stake of at least 75 percent are represented in person or through proxies.

Such a resolution can nonetheless be nullified if investors with a 10 percent equity or more vote against it.

Draft regulations

The CMA's Draft Capital Markets (Public Offers & Listing of Securities) Regulations 2022 published earlier this month are now making it compulsory for the majority shareholders to offer minority owners fair compensation for their stock and a way out of the firm before it gets delisted.

Source: Business Daily