Corporate Governance Policy (Kenya)

A Corporate Governance Policy in Kenya establishes the obligations and procedures governing the conduct it regulates.

Corporate governance in Kenya is primarily regulated by the Companies Act No. 17 of 2015, which replaced the repealed Companies Act (Cap. 486) and introduced significantly stronger director accountability standards, shareholder protection mechanisms, and disclosure obligations. The Companies Act No. 17 of 2015 draws heavily on the United Kingdom Companies Act 2006, adapted for the Kenyan context. Section 143 of the Companies Act No. 17 of 2015 establishes the general duties of directors — including the duty to act within powers, promote the success of the company, exercise independent judgment, exercise reasonable care, skill and diligence, avoid conflicts of interest, and not accept benefits from third parties. These statutory duties supplement and partly codify the common law fiduciary duties that have long been recognised by the High Court of Kenya.

For companies listed on the Nairobi Securities Exchange (NSE), corporate governance standards are additionally regulated by the Capital Markets Authority (CMA) under the Capital Markets Act (Cap. 485A). The CMA issued the Corporate Governance Code for Issuers of Securities to the Public (CG Code 2015, revised 2019) which establishes comply-or-explain requirements for board composition, independent directors, audit committee composition, internal audit, risk management, and shareholder rights. Compliance with the CMA CG Code is evaluated annually and reported in listed companies' annual reports and governance disclosures filed with the CMA and the NSE.

Beyond listed companies, the Institute of Certified Public Secretaries of Kenya (ICPSK), the Institute of Directors Kenya (IoDK), and the Centre for Corporate Governance (CCG) promote voluntary adoption of corporate governance standard practices by private companies, state corporations, financial institutions regulated by the Central Bank of Kenya (CBK), and NGOs. The CBK's Prudential Guidelines issued under the Banking Act (Cap. 488) impose specific governance requirements on commercial banks, microfinance institutions, and mortgage finance companies — including minimum board size, independent directors, board committees, and a Chief Risk Officer.

A Corporate Governance Policy is a practical instrument that translates statutory obligations and best practice principles into operational procedures for a specific company. It is distinct from the Company Constitution (Memorandum and Articles of Association consolidated under the Companies Act 2015), which is the constitutional document registered with the Business Registration Service (BRS). The Corporate Governance Policy is an internal document approved by the Board of Directors that can be updated by board resolution without the formality of a shareholder resolution and BRS filing required for constitutional changes.

For state corporations governed by the State Corporations Act (Cap. 446), the Mwongozo Code of Governance for State Corporations (2015), issued by the State Corporations Advisory Committee, prescribes specific governance standards including board composition requirements, remuneration, oversight of management, and reporting to the Cabinet Secretary of the relevant ministry.

A Kenya Corporate Governance Policy is required or strongly recommended in the following circumstances.

A Corporate Governance Policy is required for all companies listed on the Nairobi Securities Exchange (NSE) under the Capital Markets Authority (CMA) Corporate Governance Code for Issuers of Securities to the Public. Listed companies must adopt and disclose their governance policies in their annual reports, and the CMA evaluates compliance with the code on a comply-or-explain basis. The NSE Listing Rules also impose specific governance requirements as conditions of continued listing.

A Corporate Governance Policy is required for commercial banks, mortgage finance companies, and microfinance deposit-taking institutions regulated by the Central Bank of Kenya (CBK). The CBK's Prudential Guideline on Corporate Governance (CBK/PG/01) requires regulated financial institutions to adopt and implement a board-approved corporate governance policy, conduct annual board evaluations, and maintain properly constituted Audit, Risk, and Credit committees.

A Corporate Governance Policy is needed for SACCOs regulated by the SACCO Societies Regulatory Authority (SASRA). SASRA's governance requirements for licensed deposit-taking SACCOs include board composition standards, separation of board and management functions, Supervisory Committee oversight, and annual governance assessments.

A Corporate Governance Policy is required for state corporations supervised by the State Corporations Advisory Committee (SCAC) under the Mwongozo Code of Governance for State Corporations (2015). All state corporations — parastatals, government-owned enterprises, and statutory bodies — must comply with Mwongozo requirements including board appointment processes, performance contracting, and ethics declarations.

A Corporate Governance Policy is needed for private limited companies that are seeking institutional investment, private equity funding, or a loan facility from development finance institutions (DFIs) such as the Kenya Development Finance Corporation (KDFC) or international DFIs like the IFC or DEG, which conduct governance due diligence as part of their investment assessment.

A Corporate Governance Policy is required for non-governmental organisations (NGOs) regulated by the NGO Co-ordination Board under the Non-Governmental Organizations Co-ordination Act (Cap. 134), as a condition of NGO registration and renewal. Well-governed NGOs with documented governance policies are better positioned to access donor funding from international agencies and foundations.

Parties in Kenya should prepare a Corporate Governance Policy (Kenya) proactively rather than waiting for a dispute to arise. Courts interpret agreements based on the written terms rather than oral representations. Under the Companies Act No. 17 of 2015, the Registrar of Companies at the Office of the Attorney General maintains the register of Kenyan companies. Section 3 of the Law of Contract Act (Cap. 23) governs contractual obligations. The Competition Authority of Kenya (CAK) enforces the Competition Act No. 12 of 2010. The Kenya Revenue Authority (KRA) administers corporate tax under the Income Tax Act (Cap. 470). The High Court of Kenya has unlimited original jurisdiction under Article 165 of the Constitution of Kenya 2010. Where the transaction involves regulated activities, prior approval from the relevant authority may be required before execution.

A Kenya Corporate Governance Policy compliant with the Companies Act No. 17 of 2015 and CMA guidelines must contain the following essential elements.

Governance Framework and Objectives: A statement of the company's commitment to good corporate governance, the core principles (accountability, transparency, integrity, fairness), the legislative and regulatory framework applicable to the company (Companies Act No. 17 of 2015, Capital Markets Act Cap. 485A where applicable, CBK Prudential Guidelines, Sacco Societies Act No. 14 of 2008 for SACCOs), and the policy's relationship with the Company Constitution and other internal policies.

Board Composition and Structure: The minimum and maximum number of directors; the distinction between executive directors (management), non-executive directors, and independent non-executive directors; the CMA Code requirement for listed companies that at least one-third of directors be independent; the procedure for appointing and removing directors consistent with Sections 147 to 159 of the Companies Act No. 17 of 2015; skills and experience criteria for board membership; and board diversity commitments consistent with the Constitution of Kenya 2010 Article 27 (two-thirds gender rule for elective and appointive positions).

Directors' Duties: An explicit statement of the seven statutory duties of directors under Sections 143 to 149 of the Companies Act No. 17 of 2015: act within powers; promote success of the company; exercise independent judgment; exercise reasonable care, skill and diligence; avoid conflicts of interest; not accept benefits from third parties; and declare interests in proposed transactions. The policy should specify the procedure for directors to disclose conflicts of interest to the Board and how conflicted directors are excluded from related decisions.

Board Committees: Terms of reference for mandatory or recommended committees — (1) Audit Committee: composition requirements (majority independent directors, at least one financial expert), oversight of financial reporting, external auditor relationship, internal audit function, and compliance; (2) Risk Committee: risk appetite framework, risk identification and management; (3) Remuneration and Human Resources Committee: executive remuneration policy, performance evaluation, CEO succession planning.

Company Secretary: The role and responsibilities of the Company Secretary under Section 244 of the Companies Act No. 17 of 2015 — a qualified person who advises the board on governance obligations, confirms statutory compliance, maintains company records, and coordinates board meetings. The Institute of Certified Public Secretaries of Kenya (ICPSK) is the professional body for Kenyan company secretaries.

Shareholder Rights: The procedure for convening Annual General Meetings (AGMs) and Extraordinary General Meetings (EGMs) under the Companies Act No. 17 of 2015; notice requirements; proxy arrangements; shareholder voting rights; and minority shareholder protection mechanisms.

Ethics and Anti-Corruption: A code of conduct for directors and employees; conflict of interest declaration procedures; anti-bribery and anti-corruption commitments consistent with the Anti-Corruption and Economic Crimes Act (Cap. 65) and the Bribery Act No. 47 of 2016; whistleblower protection; and the role of the Ethics and Anti-Corruption Commission (EACC) in Kenya's governance ecosystem.

Financial Reporting and Audit: Commitment to prepare annual financial statements in compliance with International Financial Reporting Standards (IFRS) as adopted in Kenya; appointment and independence of the external auditor approved by the Institute of Certified Public Accountants of Kenya (ICPAK) and the Financial Reporting Centre (FRC); and internal audit function reporting to the Audit Committee.

Disclosure and Transparency: The policy on disclosure of material information to shareholders, regulators, and the public — including the KRA PIN of the company, beneficial ownership register maintained under Section 93A of the Companies Act No. 17 of 2015 and filed with the BRS, and annual return filings.

Policy Review: A commitment to review the Corporate Governance Policy at least every two years and whenever material regulatory changes occur. Forms-legal.com provides this Kenya Corporate Governance Policy as a professional starting template for companies to customise to their specific sector, size, and regulatory requirements.