Doing Business in Kenya - RSM International

A huge chunk of the Act regulates mergers. Approval of mergers and takeovers arenow the responsibility of the Authority and not the Minister of Finance as was thecase under the RTPA.A merger occurs when one or more undertakings directly or indirectly acquire orestablish direct or indirect control over the whole or part of the business of anotherundertaking. Mergers may be achieved by a purchase or lease of shares, acquisitionof an interest, or purchase of assets (where an asset is any real or personal property,whether tangible or intangible, intellectual property, goodwill, chose in action, right,licence, cause of action or claim and any other asset having a commercial value)of an entity, exchange of shares between or among undertakings which results ina substantial change in ownership structure through whatever strategy or meansadopted by the concerned undertakings or even through amalgamations and verticalintegration. The acquisition of a controlling interest in a section of the business of anundertaking capable of itself being operated independently is also considered as amerger whether or not the business in question is carried on by a company.Furthermore, any acquisition of an undertaking under receivership by anotherundertaking either situated inside or outside Kenya or an acquisition by whatevermeans of the controlling interest in a foreign undertaking that has a controllinginterest in a subsidiary in Kenya, constitutes a merger.Mandatory approval by the Authority for a merger is required if a transaction fallswithin the scope of the Act. An application should be made at any time prior tothe consummation of the merger or takeover - this is understood to mean beforecompletion or closing of the deal takes place. The Authority is bound, subject tocertain exceptions, to make a determination on a merger application within 60 daysof receipt of the notification by the Authority.Any merger carried out in the absence of an authorising order by the Authority,will be of no legal effect, and no obligations imposed on the participating partiesby any agreement in respect of the merger are enforceable in legal proceedings. Inaddition, failure to observe this requirement could lead to imprisonment for a termnot exceeding 5 years or to a fine not exceeding Shs 10,000,000 or both. In additionto these penalties, the Authority may impose a financial penalty in an amountnot exceeding 10% of the preceding year’s gross annual turnover in Kenya of theundertaking or undertakings in question.DOING BUSINESS IN KENYA15