Companies Act

Debenture holders have the right, on request and payment of any prescribed fee, to be given a copy of the trust deed securing their debentures; the company must provide that copy within seven days or face fines and officers in default may also be prosecuted.

Trust deeds or contracts that exempt or indemnify a trustee from liability for breach of trust, when the trustee fails to show the required degree of care and diligence, are void to that extent.

A company may re-issue redeemed debentures (same or new) subject to articles/contracts or a resolution/manifested intention; a person lending on a re-issued debenture may use it in evidence if it appears duly stamped (unless they had or should have had notice it was unstamped), and in that case the company is liable to pay the proper stamp duty and penalty; the person entitled to re-issued debentures keeps the same priorities as if never redeemed.

Debentures deposited by a company to secure advances are not to be regarded as redeemed solely because the company’s account is no longer in debit while the debentures remain deposited.

If a company's debentures were created as a floating charge, holders of debentures secured by a charge on the company's property take possession of that property; and if the company is not in liquidation at the relevant time, the company's preferential debts are payable out of assets that come into the possession of those persons in priority to claims for the debenture principal or interest.

Section 583 defines terms used in Part XXIV (takeovers), including 'associate', 'Authority' (Capital Markets Authority), 'the company', 'date of the offer', 'holder of shares', 'non-voting shares', 'offeror', 'offer period', 'takeover offer', 'the Takeover Rules', 'voting rights' and 'voting shares', and states when a contract to acquire shares is unconditional.

An offer to acquire shares is a takeover offer if it satisfies the two conditions set out in subsections (2) and (3).

The reference in section 584 to shares already held by the offeror includes shares the offeror has contracted to acquire, whether unconditionally or subject to conditions being satisfied.

Section 586 states that the condition in section 584(2) is treated as satisfied if subsection (2) or (3) applies, and lists specific factual situations (differences in dividend entitlement, differences in consideration value, exclusions of specified forms of consideration) that qualify.

Shares acquired (or contracted to be acquired) by the offeror during the offer period that were not acquired through acceptances are not included in a takeover offer; shares held or contracted to be acquired by an associate of the offeror are not treated as shares to which the offer relates; "contracted" means contracted unconditionally or subject to specified conditions.

Section 588 lists circumstances in which shares are excluded from a takeover offer and defines 'contracted'.

Lists categories of persons and entities treated as 'associates' of an offeror for this Part, including nominees, holding companies, subsidiaries, fellow subsidiaries, bodies corporate substantially interested, parties to share acquisition agreements, and close relatives of a natural-person offeror.

If debentures issued by a company (to which subsection (2) applies) give voting rights, they are to be treated as shares for the purposes of this Part.

Securities of a company must be treated as shares in that company when they are convertible into, or give the holder the right to subscribe for, such shares.

The Capital Markets Authority may make Takeover Rules for this Part; those Takeover Rules may give the Authority power to order a person to pay compensation (and may provide for interest).

The Capital Markets Authority must publish Takeover Rules immediately after making them; it may dispense with or modify rules in particular cases but rules made under that power have no effect unless the Authority specifies its reasons; a person is not in breach of a Takeover Rule if the rules had not been published as required.

The Capital Markets Authority may give rulings about how the Takeover rules are interpreted, applied or their effect, and such rulings can have binding effect in specified circumstances.

Rules may empower the Authority to give directions to restrain persons from acting in breach of those Rules.

The Capital Markets Authority may require production of documents and information, may authorise persons to exercise its powers and may take copies; authorised persons must produce evidence of authority when required; privileged material need not be produced; contravention of subsection (2) is an offence with a fine up to one million shillings.

Persons holding information provided to the Capital Markets Authority about a natural person's private affairs or a particular business must not disclose that information during the person's lifetime or while the business exists without the subject's consent, subject to specified exceptions.

It is an offence for a person to disclose information in contravention of section 597.

The Capital Markets Authority may impose sanctions (including financial penalties) for breaches of the Takeover Rules and must prepare and consult on draft policy statements before publishing; it may revise policy statements at any time and must consider relevant policy statements when deciding to impose sanctions.

Section 600. Failure to comply withthe Takeover Rulesrelating to bid documentation Section 600(1)(a) that are admitted to trading on a securities exchange or other regulated market in Kenya; and Section 600(1)(b) that also confer voting

The Capital Markets Authority may apply to the Court for restraining or compliance orders regarding breaches of the Takeover Rules; the Court may make restraining or compliance orders; respondents to such applications are entitled to appear and be heard.

The Authority (the Capital Markets Authority) and persons covered by subsection (2) are not liable for damages for acts or omissions in performing functions under this Part, except for acts shown to have been done or omitted in bad faith.

A failure to comply with the Takeover Rules does not by itself create a right to sue for breach of statutory duty, nor does it automatically make a transaction void or unenforceable.

A person is entitled to refuse to have a requirement under section 596(1) or an order under section 601 used against them in criminal proceedings, except for certain offences listed in subsection (2).

Defines terms used in Division 3, including "offer period", "opted-in company", "opting-in resolution" and "opting-out resolution".

A company may opt in to this Part by special resolution if two specified conditions are satisfied; a company may revoke that opt-in by a further special resolution called an opting-out resolution.

Opting-in and opting-out resolutions take effect only on an effective date specified in the resolution; an opting-in resolution’s effective date cannot be earlier than the date it is passed, and an opting-out resolution’s effective date cannot be earlier than the first anniversary of the date a copy of the opting-in resolution was lodged with the Registrar.

When a takeover bid is made for an opted-in company, specified contractual-transfer and voting provisions take effect, and a person who sustains loss because of what would otherwise be a breach of an applicable agreement is entitled to compensation.

If an offeror making a takeover bid holds at least 75% in value of the voting shares at the date of request, the offeror may request the company directors to convene a general meeting to consider the takeover bid.

Companies that pass an opting-in or opting-out resolution must notify the Capital Markets Authority in writing within fourteen days of the resolution; failure makes the company and defaulting officers liable to fines (up to 200,000 shillings) and, after conviction, further daily fines (up to 20,000 shillings) for continued non-notification.

An offeror may give a written notice to holders of shares to acquire their shares where the takeover offer meets specified value or voting-rights thresholds.

Offerors must give notices under section 611 in the manner prescribed by the regulations; they must send a copy of the notice and a statutory declaration as required, and if the offeror is a company the declaration must be made by a director; offences for failing to send required documents or making false declarations attract fines.

When an offeror gives a notice under section 611, the offeror is bound to acquire the shares on the terms of the offer; a shareholder may indicate a choice within six weeks by written communication; if non-cash consideration cannot be provided it is converted to an equivalent cash amount payable by the offeror; the offeror must send a copy of the notice to the company and pay or transfer the consideration; the company must register the offeror and holds certain consideration on trust.

If the person entitled to consideration under section 613 cannot be found or subsection (4) applies, the company must pay the consideration and accrued benefits into Court; where the trust ends (or on liquidation) the company (or liquidator) must sell non-cash consideration, lodge cash, proceeds and accrued benefits with the Registrar; enquiry expenses may be paid from the held funds.

Minority shareholders have rights conferred by subsection (2), (3) or (4)(b) to be exercised in the takeover context.

Shareholder rights under section 615(3), (4) or (5) can only be exercised by a written communication addressed to the offeror.

When a shareholder exercises rights under section 615, the offeror must acquire the affected shares on the offer terms (or other agreed terms); the offeror is both entitled and bound to do so. The shareholder may indicate a choice when requiring the offeror to acquire the shares, and the offeror may include in the section 616 notice an indication which consideration will apply if no choice is made.

An application under subsection (1) has no effect unless it is made within six weeks from the date on which the notice referred to in that subsection was given.

When a takeover offer is made jointly, the joint offerors hold the offeror's rights jointly and are jointly and severally liable for the offeror's obligations; certain formalities (e.g. statutory declaration) must be made by all joint offerors.

A company member may apply to court claiming the company's affairs are being or have been conducted in an oppressive or unfairly prejudicial manner.

The Attorney-General may apply to the Court for an order under section 783 where specified investigatory reports or findings of oppressive or unfairly prejudicial conduct exist.

If the Court finds an application under section 780 or 781 substantiated, it may make orders to give relief and the company has the right to be served and heard as respondent.

When a court order alters or directs alterations to a company’s constitution in relation to a takeover offer, the company must lodge a copy of that order with the Registrar within fourteen days (or within any extended period the Court allows).

If the Court makes an order altering a company's constitution, the company must lodge with the Registrar a copy of its amended articles or relevant resolution and must include a copy of the order with copies of articles issued after the order (unless the order's effect has been incorporated into the articles).

Defines "annual financial statement" for a company and lists items related to company financial statements and reports mentioned in this Part.

Information required by this Part to be given in notes to a company’s annual financial statement can be contained in the statement or in a separate document annexed to it.

The Part's requirements about a company's financial statement apply to each financial year of the company.

States that companies are subject to the small companies regime.

A company qualifies as small for a financial year if it meets the qualifying conditions: turnover not more than fifty million shillings, net assets not more than twenty million shillings, and no more than twenty-five employees; proportional adjustment applies for part-year periods.

A parent company is treated as a small company for a financial year only if the group it heads qualifies as a small group; a group qualifies as small when certain turnover, net assets and employee thresholds are met.

Public companies; members of ineligible groups; certain listed body corporates; and companies (with subsidiaries) carrying on cooperative society, microfinance, insurance trading or banking activities are excluded from the small companies regime.

Defines when a company counts as a "quoted company" for a financial year: if it was a quoted company immediately before the end of the accounting reference period used to determine that financial year.

Companies must keep proper accounting records, including records of transactions, financial position, assets and liabilities, stock statements and compliance with prescribed accounting standards.

If a company fails to comply with a provision of section 628, the company and each officer in default commit an offence; penalties include fines (company: up to two million shillings; natural person: up to one million shillings) and for natural persons imprisonment up to two years.

A company must keep its accounting records at its registered office, ensure the records are at all times open to inspection by the company's officers, and preserve accounting records for not less than seven years (with a liquidation-related qualification to subsection (2)).

If a company fails to comply with section 630(1), the company and each officer in default commit an offence; penalties differ for corporates and natural persons.

Directors of a parent company must (unless they have good reasons) ensure each subsidiary’s financial year coincides with the parent; failing to do so is an offence with a fine up to 500,000 shillings and further daily fines up to 50,000 shillings.

Accounting reference periods are set by a company's accounting reference date; unless the articles or law provide otherwise that date is specified by an ordinary resolution; the company's directors must ensure the first accounting reference period is between six and eighteen months after incorporation; subsequent periods are successive 12‑month periods; subject to section 634.

Sets rules about changing a company's accounting reference date, defines 'previous accounting reference period', allows the Cabinet Secretary to exempt subsection (4) for specified companies, and prohibits a company from lodging a notice about a previous period if the time to file associated financial statements has expired.

Directors of every company must prepare an annual individual financial statement for the company.

Directors must ensure the company's (or group's) financial statements give a true and fair view; auditors must have regard to that duty; directors in default commit an offence and on conviction face a fine not exceeding 500,000 shillings.

Directors must prepare the company’s individual financial statement in accordance with section 638; subsection (1) is subject to section 645; failure by a director in default is an offence punishable by a fine not exceeding five hundred thousand shillings.

Directors must ensure a company's individual financial statements comply with this section and must include specified statements; if compliance would conflict with giving a true and fair view they must depart and disclose particulars in a note.

Directors must prepare a group financial statement for the year when, at the end of a financial year, the company (not subject to the small companies regime) is a parent company, unless that company is exempt.

If a condition for the exemption is not complied with, the company and any director in default commit an offence and on conviction each may be fined up to five hundred thousand shillings.

A parent company is exempt from preparing a group financial statement if, under section 644, all its subsidiary undertakings could be excluded from consolidation.

Directors of the parent company must prepare group financial statements when such statements are required.

Directors of a parent company must ensure group financial statements for a financial year comply with this section; in special circumstances they must depart from other provisions to give a true and fair view and must disclose particulars of any departure; failure is an offence punishable by a fine not exceeding five hundred thousand shillings.

Directors of the parent company must include all subsidiary undertakings in the group consolidation, subject to specified exceptions; directors who fail to comply commit an offence and may be fined up to five hundred thousand shillings.

Directors of the parent company must ensure the parent company's and its subsidiaries' financial statements are prepared using the same financial reporting framework, unless they consider there are good reasons not to; this does not apply if the directors do not prepare a group financial statement, and applies only to subsidiary statements required under this Division. Failure by a director in default is an offence punishable by a fine not exceeding five hundred thousand shillings.

If a company prepares group financial statements and the notes show the company's profit or loss determined under the Act, the company may omit specified information from its individual profit and loss account; the company may also omit that account from the annual financial statement for purposes of other provisions, but the exemption applies only if the annual financial statement discloses that the exemption applies.

Regulations may require notes to annual financial statements to include information about related undertakings; directors must state if they take an exemption; failing to state it is an offence with a fine not exceeding five hundred thousand shillings.

If the directors fail to annex the full related-undertakings information required by subsection (3)(b), each director in default commits an offence punishable on conviction by a fine not exceeding 200,000 shillings; if, after a former director is convicted under subsection (5), the directors continue to fail to comply, each director in default commits a daily offence punishable on conviction by a fine not exceeding 20,000 shillings for each day of continuing failure.

Directors must ensure the company's annual financial statement includes the average number of employees (overall and by category) and employee-related costs; failure by a director to comply is an offence punishable by a fine up to five hundred thousand shillings.

Directors (except in small companies) must include in their company's financial statement notes details of benefits received during the relevant financial year; directors or former directors must give prescribed notices in writing, and failure without reasonable excuse is an offence punishable by a fine up to five hundred thousand shillings.

Companies must include specified details about advances, credits and guarantees involving directors in the notes to the company’s individual financial statement.

Directors must approve a company’s annual financial statements as soon as practicable after preparation, arrange for one or more directors to sign them, sign the company’s balance sheet, and include a statement on the balance sheet if prepared under the small companies regime; certain non‑compliance can be an offence punishable by a fine not exceeding one million shillings.

Directors of a company must prepare a directors' report for each financial year; if the company is a parent and a group financial statement is prepared, the directors must prepare a group directors' report. Failure by a director to comply is an offence and may lead to a fine not exceeding five hundred thousand shillings.

Directors must state any amount they recommend as a dividend in the directors' report, except for companies subject to the small companies regime; failure to comply can make each defaulting director commit an offence liable to a fine up to five hundred thousand shillings.

Directors must include in their report a business review complying with subsection (3), unless the company is subject to the small companies regime.

Section 655 does not require disclosure of information about impending developments or matters under negotiation if, in the opinion of the directors, disclosure would detrimentally affect the company; and subsection 655(4)(c) does not require disclosure of information about a person if, in the opinion of the directors, disclosure would seriously prejudice that person and be contrary to the public interest.

Directors must include specified statements in the directors’ report about disclosure to the company's auditors and take steps to ensure auditors are made aware of relevant audit information; failure in certain respects is an offence punishable by fine or imprisonment.

Directors must, as soon as practicable after finishing the annual report, approve it and arrange for one of them or the company secretary to sign it; if certain knowledge or recklessness and failure to take reasonable steps occur, an offence is committed with specified penalties.

Directors of a quoted company must prepare a directors’ remuneration report for each financial year.

Directors (including former directors within the past five years) must provide to the company personal details required by regulations; failure to do so is an offence punishable on conviction by a fine not exceeding five hundred thousand shillings.

Directors must approve the directors’ remuneration report and arrange for one of them or the company secretary to sign it; certain failures to ensure compliance are an offence punishable by a fine up to one million shillings.

Companies must send copies of their annual financial statement and reports to members, debenture holders and persons entitled to notice of general meetings; a company need not send copies to persons for whom it does not have a current address, and companies without share capital need not send copies to persons not entitled to receive meeting notices.

A public company must comply with section 662 at least twenty-one days before the general meeting when the financial statement and reports are to be laid.

If a company fails to comply with section 662 or 663, the company and each officer in default commit an offence and are liable on conviction to a fine not exceeding one million shillings; continued failure after conviction attracts a daily fine not exceeding one hundred thousand shillings.

A company may send its members a summary financial statement instead of the full financial statement required under section 662, in circumstances prescribed by regulations and subject to any prescribed conditions.

The company must send copies of the financial statement and reports to any person entitled to receive them in accordance with section 662 who wishes to receive them.

Summary financial statements for unquoted companies must be derived from the company’s annual financial statement and prepared in accordance with this section and any regulations; they must state specified content including that they are a summary, whether additional information from the directors’ report is included, how entitled persons can obtain full copies, consistency with the annual financial statement and directors’ report, and details about the auditor’s report and the auditor’s statement under section 728 including any qualifications.

Section 668 allows a company to include additional information in a summary financial statement and permits regulations to require quoted companies to send specified information at the same time as the statement.

Failure by a company or an officer to comply with requirements in sections 666–668 is an offence; on conviction each is liable to a fine up to 250,000 shillings; continued non-compliance after conviction attracts daily fines up to 25,000 shillings.

Quoted companies must make their annual financial statements available on a website that complies with section 672 and keep them available until the next year's statement is made available in accordance with this section.

A quoted company must publish a preliminary statement of results (including a balance sheet and profit and loss account) on a website that complies with section 672 and keep it available until the annual financial statement is published under section 662; failure attracts fines for the company and defaulting officers.

Companies must maintain a website (or have it maintained on their behalf), identify the company on it, make required information available promptly and keep it available during the relevant period; access may be conditioned on a fee or otherwise restricted subject to legal/regulatory compliance, and limited availability or failures may be excused in certain circumstances.

Members and holders of debentures of an unquoted company are entitled to a single copy of the company's last annual financial statement, the last directors' report and the auditor's report; failure by the company or defaulting officers to comply with a demand is an offence punishable by fines.

Members or debenture holders are entitled to one copy of specified company financial documents; failure by the company or its officers to comply with a demand for those documents is an offence punishable by fines.

Companies publishing documents covered by this section must state the name of the person who signed the document on behalf of the directors.

When publishing its statutory financial statement a company must enclose or annex a copy of the auditor’s report unless it is exempt from audit and the directors have taken advantage of the exemption; companies preparing statutory group financial statements must also publish the individual financial statement for that year; failure to comply makes the company and defaulting officers guilty of an offence liable on conviction to a fine not exceeding five hundred thousand shillings; the section does not apply to provision of a summary financial statement under section 665.

Companies publishing non-statutory financial statements must include specified disclosures and must not publish certain statutory reports or balance sheets alongside them; contraventions create offences attracting a fine of up to five hundred thousand shillings.

Defines the meaning of “publication” in relation to a company’s financial statement and reports.

Directors of a public company must present copies of the annual financial statement and directors’ and other reports to members at a general meeting, and must do so not later than the deadline for lodging the company's financial statement with the Registrar for registration.

If the requirements of section 679 are not complied with before the end of the specified period, every person who immediately before that end was a director of the company commits an offence.

Directors of a quoted company must, before the general meeting where the financial statements are presented, give members notice of the intention to move an ordinary resolution approving the directors' remuneration report for the financial year.

Directors of a quoted company who fail to comply with section 681(1) commit an offence and are liable on conviction to a fine not exceeding five hundred thousand shillings; similarly, existing directors of a company whose shares are the subject of a takeover offer commit an offence if a resolution approving the directors' remuneration report is not put to the vote at a qualifying general meeting, with the same fine, but it is a defence to prove all reasonable steps were taken.

The directors of a company must lodge with the Registrar, for each financial year, the financial statement and reports required by sections 686, 687 or 688.

Private companies must lodge financial statements within nine months after the end of their relevant accounting reference period; public companies must lodge within six months; alternative deadlines in subsections (2) and (3) (including three-month rules and anniversary-based timings) may apply.

Rules for calculating the deadline to lodge a company’s financial statement when that deadline is expressed as a specified number of months from a specified date or after a prior deadline.

Directors of companies subject to the small companies regime must lodge annual financial statements (balance sheet, profit and loss account, directors' report) and the auditor's report with the Registrar; if exempt from audit, the auditor's report requirement does not apply; failure by a director to comply is an offence punishable by a fine not exceeding five hundred thousand shillings.

Unquoted companies whose shares are the subject of a takeover offer must lodge their annual financial statement, directors' report and auditor's report; subsection (1)(c) (auditor's report) does not apply if the company is exempt from audit and the directors have used that exemption. Failure by directors to comply is an offence punishable on conviction by a fine not exceeding five hundred thousand shillings.

Quoted companies (described as "the company whose shares are the subject of a takeover offer;") must lodge specified annual reports (annual financial statement, directors' remuneration report, directors' report and a copy of the auditor's report). Copies lodged with the Registrar must state signatory and auditor details (or, if section 737 conditions apply, that a resolution has been passed and notified). If directors fail to comply with subsections (1) or (2) each director in default commits an offence and on conviction is liable to a fine not exceeding five hundred thousand shillings.

Certain unlimited companies are exempted from the requirement to lodge statutory financial statements with the Registrar, and such companies must publish with their financial statement a statement indicating that they are exempt.

Directors must lodge an abbreviated financial statement with the Registrar; if the statement is qualified they must include the full auditor's report in a special report; companies entitled to lodge abbreviated statements must ensure they are properly prepared; failure to comply with subsection (2) exposes each defaulting director to an offence and a fine not exceeding two hundred thousand shillings.

An abbreviated financial statement is valid only after approval by the company's board of directors and must be signed on behalf of the board by a designated director, who must sign the balance sheet and include a prominent statement above the signature about preparation under the small companies provisions; non-compliance with knowledge or recklessness and failure to take reasonable steps is an offence liable to a fine not exceeding five hundred thousand shillings.

Directors commit an offence if the company's financial statements and reports required under section 683 are not lodged before the lodgement deadline; on conviction they face a fine up to 200,000 shillings. After conviction, continued non-compliance with section 696 attracts a daily fine up to 20,000 shilling.

If a company's financial statements or reports required by section 683 are not lodged by the deadline and the directors do not comply within 14 days of a written notice, a member, creditor or the Registrar may apply to the Court, which may order the directors to rectify the failure within a period and may require the directors to bear the costs of the application.

A company is liable to a default penalty if it fails to comply with section 683 in lodging its annual financial statement and reports with the Registrar by the lodging deadline; the Registrar may recover penalties in court and must pay recovered penalties into the Consolidated Fund.

Directors of a company may revise specified company documents if those documents do not comply with the Act.

The Cabinet Secretary may give written notice to a company's directors if the financial statement or directors' report sent out under section 662, lodged with the Registrar, or laid before the company appears not to comply with the Act; the notice must specify a period of not less than one month for directors to explain or prepare revised statements.

The Cabinet Secretary or an authorised person may apply to the Court to obtain a declaration and order to rectify a defective annual financial statement or directors' report; on making such an application they must lodge a notice with the Registrar; directors are entitled to be served and to appear; the Court may order directors to prepare revised statements and may direct remedies and costs; the applicant must lodge the Court's order or a notice of failure or withdrawal with the Registrar at the end of proceedings.

The Cabinet Secretary may authorise other persons to make applications to the Court under section 710, may refuse or revoke such authorisations, may vary conditions by written notice, and may authorise persons only if satisfied they can perform the functions in accordance with conditions; persons may be authorised generally or for particular classes of case.

Kenya Revenue Authority has the power to disclose information to an authorised person for certain purposes; a person guilty under subsection (4) may be fined up to one million shillings.

Authorised persons (including the Cabinet Secretary) may require a company or related persons to produce documents or provide information and explanations; failure to comply permits the authorised person to apply to the Court which may order production; statements made in response cannot be used in criminal proceedings against the respondent.

Persons holding information obtained under section 700 must not disclose it about a natural person or particular business during that person's lifetime or while the business continues, unless the person or business consents; limited exceptions and defences apply; wrongful disclosure is an offence liable to a fine of up to one million shillings.

Section 702 permits the Cabinet Secretary or an authorised person to disclose information obtained under compulsory powers (section 700) to specified domestic authorities, for disciplinary proceedings, to assist certain agencies perform statutory functions, and to foreign authorities with conditions.

Directors of a company must compensate the company for losses caused by untrue or misleading statements, or omissions required to be included, in certain company documents, but are not liable to other persons who relied on those documents; this does not affect criminal liability.

Regulations may make further provision about financial statements and reports of companies.

Every company must submit successive annual returns to the Registrar, made up to the company's return date, complying with section 706 (and if applicable section 707), signed by a director or the secretary, and lodged within twenty eight days after the date to which each return is made up.

The annual return must include specified items such as the company's registered office address, company type, principal business activities, directors, secretary (where applicable), authorised signatories, financial statements or an exemption statement, and a statement on any change in the register of beneficial owners.

The company must include in its annual return a statement of capital and specified particulars about members and ensure the return meets prescribed requirements; if shares have been converted to stock, the return must state the amount of stock instead of number or nominal value of shares.

If a company fails to lodge the annual return required by section 705(1), or lodges a return not complying with section 705(3), the company and each officer in default commit an offence punishable by a fine (up to 200,000 shillings); continued failure after conviction creates a daily offence punishable by a fine (up to 20,000 shillings) for each day the failure continues.

Directors must ensure that the statement required by subsection (2) or (3) appears on the balance sheet above the signature required by section 652.

Members of a company that would otherwise be exempt from audit may, by notice, require the company to obtain an audit of its financial statements for a financial year.

A company that meets the subsection (2) conditions for a financial year is exempt from the Act's audit requirements for that year.

A company that was a public company or carried on banking or insurance during the relevant financial year is not entitled to the small companies exemption under section 711.

A group company may qualify for the small companies exemption if the conditions in subsection (2) are satisfied or subsection (3) applies; subsection (2) sets size and turnover/asset thresholds and subsection (3) provides an exception for a subsidiary undertaking that is dormant throughout relevant periods.

Dormant companies that meet the listed conditions are exempt from audit of their financial statements.

Insurance companies, banking companies and e-money issuers are excluded from the dormant companies exemption.

Companies that are non-profit-making and whose financial statements are audited by the Auditor General are exempt from this Part's audit requirements for a financial year.

Private companies must appoint an auditor or auditors for each financial year unless the directors resolve an audit is unlikely to be required.

If a private company fails to appoint an auditor within the appointment period, the company must notify the Registrar in writing within seven days; the Registrar must appoint auditors unless there are good reasons not to; failure to notify is an offence with fines on conviction.

Auditors of a private company must not take office until any previous auditor(s) cease, and (unless reappointed) cease to hold office at the end of the next period for appointing auditors.

Members holding at least the requisite percentage can prevent an auditor being automatically re‑appointed by giving authenticated notices received by the company before the end of the preceding accounting reference period; the "requisite percentage" is five percent unless the company's articles specify a lower figure.

Public companies must have an auditor or auditors for each financial year unless the directors reasonably resolve otherwise; for years after the first, the company must ensure appointment before the general meeting at which the prior year's annual financial statement is presented.

If a public company has not appointed auditors within the appointment period, the company must notify the Cabinet Secretary in writing within seven days; the Cabinet Secretary may appoint auditors after notification unless satisfied otherwise; failure to notify is an offence attracting fines (up to 500,000 shillings on conviction and 50,000 shillings per day thereafter).

Auditors do not take office until the previous auditor(s) have ceased to hold office, and they cease to hold office at the conclusion of the next financial statements meeting following their appointment unless re-appointed.

Members or directors must fix an appointed auditor’s remuneration; an auditor appointed by the Registrar is entitled to receive remuneration at a reasonable rate fixed by the Registrar; "remuneration" includes expenses and covers benefits in kind.

Companies must disclose the terms on which their auditor is appointed, remunerated, or required to carry out auditor responsibilities, and the Cabinet Secretary must ensure regulations require disclosure of any variation.

Authorises regulations to provide for safeguarding disclosure of the nature of services provided by a company's auditor.

An auditor's report must identify the audited annual financial statement and reporting framework; describe the audit scope and auditing standards; state whether financial statements (individual and, where relevant, consolidated) give a true and fair view; and say whether the report is unqualified or qualified and note any matters the auditor wishes to draw attention to without qualifying the report.

The auditor must state in the auditor’s report on the company’s annual financial statement whether, in the auditor’s opinion, the information in the directors’ report for the relevant financial year is consistent with that financial statement.

An auditor must report to the company’s members on the auditable part of the directors’ remuneration report and state whether, in the auditor’s opinion, that part has been properly prepared in accordance with this Act.

The auditor must report in the auditor's report when they cannot obtain necessary information or explanations, must include particulars in the report where specified regulations (section 650 or, for quoted companies, section 660) are not complied with, and must state if directors used the small companies regime when they were not entitled to do so.

The section establishes an auditor's right to access a company's accounting records and financial statements at all times, and protects persons from being compelled to disclose legally privileged information.

Parent companies must take reasonable steps to obtain information from specified persons; contravention by a company or its officers is an offence punishable by a fine up to one million shillings; statements made under this section are protected from use in criminal proceedings except for proceedings under section 733; privileged information need not be disclosed.

Section 733 creates offences for (1) making materially false or reckless statements (penalty: fine up to one million shillings or imprisonment up to three years, or both); (2) failing to comply with a requirement under section 732 (penalty: fine up to five hundred thousand shillings); and (4) parent company and officer default (penalty: fine up to five hundred thousand shillings). Subsection (3) provides a defence that it was not reasonably practicable to provide the required information. Subsection (5) preserves an auditor's right to seek a compliance order.

The auditor is entitled to receive communications and notices relating to resolutions and meetings, to attend general meetings, and to be heard there; if the auditor is a firm, a written-authorised natural person may exercise attendance and hearing rights.

Auditors must sign and date their report and ensure the auditor's name appears; if the auditor is a firm the firm's senior statutory auditor must sign; failure is an offence punishable by a fine up to two hundred thousand shillings.

If a copy of an auditor's report is published without the statement required by this section, the company (in takeover-offer circumstances) and each officer in default commit an offence and on conviction are each liable to a fine not exceeding five hundred thousand shillings.

Auditors’ names may be omitted from published copies of the auditors' report if the conditions specified in subsection (2) are satisfied.

Persons to whom this section applies commit offences for including false or materially misleading information in a company's auditor's report or for failing to include statements required by section 730(2)–(5); on conviction the person may be fined up to one million shillings or imprisoned for up to three years, or both.

Members of a company may remove an auditor from office at any time, by ordinary resolution at a meeting or in accordance with section 740; a person retains any right to claim compensation or damages for termination of their appointment.

A special written notice is required for a resolution at a company's general meeting to remove an auditor; on receipt the company must serve the notice on the auditor, the auditor may make written representations (up to two thousand words) and request the company notify members, and the company must notify members and send copies unless members would not receive them before the meeting.

A company must lodge a copy of a resolution with the Registrar within fourteen days after the resolution is passed under section 739.

Rights of auditor who has been removed from office.

Private companies proposing a written resolution to appoint an auditor must send copies to the person proposed and the outgoing auditor; the company must circulate any auditor representations with the resolution copies (with a 28-day service period) and failure to comply is an offence punishable by a fine up to 500,000 shillings. The auditor is entitled to be served and heard on applications about defamatory representations.

Companies must send proposed-auditor resolution notices to the proposed appointee and the outgoing auditor; auditors may make written representations (up to 2,000 words) and ask the company to circulate them; companies must state and circulate those representations to members unless they would not arrive before the meeting; failure to comply attracts an offence and a fine up to 500,000 shillings.

An auditor of a company may resign by lodging a written notice at the company's registered office; the notice is not effective unless accompanied by the statement required by section 748; an effective notice ends the auditor's term on the date it is lodged or on a later date specified in the notice.

A company must, within fourteen days after an auditor resigns, lodge with the Registrar for registration a copy of the notice of resignation; failure by the company or any officer in default is an offence liable on conviction to a fine not exceeding two hundred thousand shillings, and continuing failure after conviction attracts a further daily fine not exceeding twenty thousand shillings.

If a resigning auditor provides a statement of the circumstances of resignation, the auditor may requisition a directors' meeting; directors must convene a meeting within twenty-one days for a day no more than twenty-eight days after notice; company need not send copies if members would not receive them before the meeting; directors who fail to ensure convening may commit an offence punishable by a fine up to one million shillings.

When an auditor (of an unquoted or quoted company) ceases to hold office they must lodge a statement at the company's registered office describing the circumstances; there are specific timing rules (with resignation, with notice; if not seeking re-appointment, not less than fourteen days before the appointment deadline; otherwise within fourteen days from ceasing). Failure to comply is an offence liable to a fine not exceeding five hundred thousand shillings.

When a company lodges a statement under section 748 about an auditor ceasing to hold office, the company must either send copies to those entitled or apply to the Court; the auditor is entitled to be served and heard; the Court may order that copies need not be sent and may order costs; the company must send follow-up notices within fourteen days depending on the Court's order or decision; failure by the company or defaulting officers is an offence punishable by a fine not exceeding one million shillings.

Auditor must lodge a copy of the auditor's statement with the Registrar for registration within seven days in specified circumstances; failure is an offence with fines and a possible defence of due diligence.

An auditor who stops holding office before their term ends must notify the appropriate audit authority in writing and include in that notice the statement lodged at the company’s registered office; failure to comply is an offence punishable by a fine up to five hundred thousand shillings, subject to a defence of due diligence.

If an auditor leaves before their term ends, the company must notify the appropriate audit authority in writing and (within 14 days of the auditor's lodged statement) give notice as required; failure by the company or any officer in default is an offence with fines up to one million shillings and continuing daily fines of up to one hundred thousand shillings.

The appropriate audit authority must inform the Cabinet Secretary and the Institute of Certified Public Accountants of Kenya when an auditor’s appointment ceases; it may forward copies of enclosed statements; the Institute is exempt from notifying itself; sections 701 and 702 apply to copies sent under subsection (1).

Defines "appropriate audit authority" as the body designated by the regulations for the purposes of this Division.

Section title: Effect of casual vacancies.

Members may request the company to publish on its website an auditor's statement about the audit or circumstances of an auditor ceasing to hold office, subject to specified member-qualification thresholds and court override.

Requires companies subject to a takeover offer to maintain and publish specified information on a website, make it available within three working days when required, keep it available until after the related meeting, and prohibits charging for or conditioning access to that information.

Quoted companies must forward website-published statements required under section 756 to their auditors when they make them available, and quoted companies are not entitled to require members requesting website publication to pay expenses for compliance.

If a quoted company or any officer in default fails to comply with the requirements of section 757(1) or (3) or 758(1) or (3) they commit an offence and on conviction are each liable to a fine not exceeding five hundred thousand shillings; if they continue to fail after conviction they commit a further offence on each day the failure continues and are liable to a fine not exceeding fifty thousand shillings for each such offence.

Defines the meaning of “quoted company” for the purposes of sections 757 to 760.

Section 761 voids provisions that exempt auditors from liability and voids company indemnities that protect auditors against liabilities incurred for negligence, default, breach of duty or breach of trust when auditing a company's financial statements.

A company may indemnify an auditor for liability incurred in defending proceedings if judgment is given in the auditor’s favour or the auditor is acquitted.

The court may relieve certain company officers or auditors from liability on terms if they acted honestly and reasonably and ought fairly to be excused; such persons may apply to the court for relief when they reasonably believe a claim may be made against them.

Defines "liability limitation agreement" (an agreement that purports to limit an auditor's liability to a company) and states such agreements must comply with section 765, be authorised by the members, and are effective only to the extent provided by section 767.

Section 765 sets rules about the terms of liability limitation agreements for audits of company financial statements, including what such agreements may or must contain and that regulations may be made to prevent adverse effects on competition.

A liability limitation agreement for a company whose shares are the subject of a takeover offer is authorised only if authorised under this section by the company's members and that authorisation has not been withdrawn; the company must pass specified resolutions before or after entering into the agreement as described in the section.

Section 767 explains matters mentioned in subsection (1) about the auditor (responsibilities, contractual obligations to the company whose shares are subject to a takeover offer, and professional standards), states that a liability limitation agreement purporting to limit the auditor's liability to less than the amount in subsection (1) will have effect as if limited to that amount, and lists matters in subsection (3) relating to timing and recoverability of compensation.

A company must disclose any liability limitation agreement: individual-statement companies in the notes to the financial statement; group-statement companies in the manner prescribed by regulations; or either kind of company in the directors' report.

Directors of a quoted company must ensure the company has an audit committee appointed by the shareholders; an ultimate parent quoted company may assume that responsibility for a subsidiary; directors who default commit an offence and may be fined up to one million shillings.

Sets corporate governance responsibilities for quoted companies including setting principles, policies, oversight, standards of conduct, and providing information to directors.

Persons who are properly supervised and appropriately qualified are appointed as statutory auditors.

Eligibility for appointment requires being the holder of a practicing certificate issued under section 21 of the Accountants Act (Cap. 531).