FAQs

Corporate Governance

General Governance Questions

What are the areas of corporate governance that a company should focus on during the COVID 19 crisis?

Kenya - Anjarwalla & Khanna

All aspects of corporate governance are important for the survival of a company especially during a crisis such as the COVID 19 pandemic. These areas include:

  1. Ethical and Strategic Management
  2. Transparency and Disclosure
  3. Compliance with Laws and Regulations
  4. Stakeholder Relations
  5. Board Independence
  6. Policies, Systems and Practices
  7. Consistent Shareholder and Stakeholder Value Enhancement Questions
  8. Corporate Social Responsibility
  9. Sustainability

Should the Board change how it interacts with senior management during the COVID 19 crisis?

Kenya - Anjarwalla & Khanna

Even in an emergency situation such as the COVID 19 pandemic, the Board remains ultimately responsible for the management of a company and must continue to be involved in the decision-making process and continue interacting with senior management; albeit through alternate modes of communication. A well constituted board with the right mix of skills will have a wealth of perspective that will allow the company to adapt to the current crisis.

For certain functions which are ordinarily delegated by the Board to senior management, such as managing employees and the working environment, it may be necessary for senior management to involve the Board during the crisis so as to obtain strategic direction in respect of how they carry out these functions and to deliberate with the Board on how management decisions in these respects may affect the sustainability of the company.

Should a company continue to hold board meetings during the pendency of the COVID 19 crisis?

Kenya - Anjarwalla & Khanna

A number of Governments have put in place various restrictions aimed at minimising movement and public gatherings altogether. Whilst these restrictions do not necessarily hinder companies from holding board meetings at this time, it would be very impractical to hold physical meetings as it is likely to be very difficult to get all the directors together at a physical location as some might be working from home, others might be under quarantine or others might be uncomfortable with attending physical meetings due to the heightened risk of infection.

As such, the company would need to consider alternatives to physical meetings which have been provided for under its articles of association. In particular, companies should consider the use of alternative methods such as Zoom, Skype and various others.

This is a good time for companies to consider e-board solutions and moving away from traditional methods of conducting board business such as preparing hard copies of board papers and having to transport them physically to each board member. Where this is restricted under the company’s constitutional documents, the company should amend them to make it easier for the Board to conduct its business during a crisis such as this.

What are some of the ways that companies can manage their key stakeholders during the COVID 19 crisis?

Kenya - Anjarwalla & Khanna

During the COVID 19 crisis, it is important for a business to quickly identify the manners in which its key stakeholders are impacted by the pandemic within the context of its business operations.

A company with a good stakeholder management framework and a culture of good stakeholder management will be well equipped to manage both its internal and external stakeholders even in unprecedented crises such as the COVID 19 pandemic.

The following issues in respect of managing its stakeholders  require particular attention:

1. Communication

A company will need to have a robust communication policy which will enable it to communicate effectively and accurately with its stakeholders. Having a robust communications policy would allow a business to control the narrative and would mitigate against the risk of the spread of false and damaging information about the company in respect of its management of the COVID 19 crisis.

It is also paramount for businesses to maintain communication channels with their employees and customers, especially where they have adopted a work-from-home regime during the pendency of the COVID 19 pandemic.

2. Working Environment Management

The ability of an institution to create a safe environment for its customers and its employees is critical for the survival of the institution. This is clearer for businesses whose nature of work requires physical access to their premises. Customers need to feel that the business is taking all reasonable steps to ensure their safety and employees will be motivated to work for a company that aligns its interests with theirs.

The actual steps that a company would need to take would be highly dependent on the particular circumstances of the business. A survey conducted by Deloitte China in January 2020 found that in dealing with COVID 19, 90% of the organisations interviewed felt that it was urgent and important to provide their employees with remote and flexible working options. This option was found to be more challenging for energy, resources, and industrial companies.[1]

3. Compliance with Regulatory Directives

All businesses must comply with regulatory directives issued during this period. Some of these directives will directly impact how a business relates with all its stakeholders such as regulators, shareholders, employees, customers, suppliers etc.

Should reporting requirements to the Board and other stakeholders be suspended?

Kenya - Anjarwalla & Khanna

As discussed above, the Board and other stakeholders will need to be informed about the affairs of the company in order for them to make appropriate decisions as users of company information.

How will the COVID 19 pandemic affect compliance obligations of companies?

Kenya - Anjarwalla & Khanna

During this time, there are several directives being issued by governments around the world which are increasing the obligations applicable during the pendency of the COVID-19 pandemic. As stated above, all businesses will be required to comply with all laws, regulations and directives issued by regulators.

Should filings be made with the Business Registration Service during the COVID 19 pandemic?

Kenya - Anjarwalla & Khanna

The Business Registration Service (the BRS) issued a public notice on 26 March 2020 according to which, its services will be offered as follows due to the Government of Kenya’s directive that government offices, businesses and companies allow employees to work from home:

  1. Online services continue to be operational albeit with minimal interruption in the turnaround time. Services such as filing annual returns, effecting changes in company officials or company details which are done online can still be carried out;
  2. Some staff members will be at the Companies Registry to assist with registration of businesses as well as investigations by investigative agencies;
  3. For registration of debentures and charges, the BRS has designated a drop-off point at Sheria House where customers can drop off their documents for registration. The process is as follows:
    1. Undertake a self-assessment and effect the registration fees using the BRS Paybill number 655650;
    2. Attach a piece of paper showing proof of payment indicating your phone number and email address;
    3. Drop off certified copies of the debenture/charge and all supporting documents at the designated drop off point at Sheria House in a sealed envelope;
    4. The documents are to be processed within 2 working days after which the BRS will send a notification on SMS when the documents are ready for collection at the designated point at the Sheria House.

 

 

Governance Issues for Listed Companies

How does COVID 19 affect a listed company’s disclosure obligations under the CMA Code of Corporate Governance?

Kenya - Anjarwalla & Khanna

The COVID 19 pandemic is likely to impact a company in ways that must be disclosed in accordance with a listed entity's continuous disclosure obligations under the NSE Listing Rules.

There are a number of foreseeable circumstances in which COVID 19, or matters relating to COVID 19, may give rise to market-sensitive information concerning a listed entity, such as in relation to earnings forecasts, employees, material contracts and financing arrangements; the supply of, and demand for, its products or services; as well as external considerations, such as government intervention. Such matters should be considered as part of a proper and ongoing assessment of a listed entity's continuing disclosure obligations.

The Capital Markets Authority (the CMA) issued a press release on 24 March 2020 according to which the CMA extended the deadline for licensed entities to file and publish their financial statements by one month.  However, the CMA has encouraged firms that can complete and file their statements and publish the same within the regulatory timelines to do so to ensure investors obtain information in a timely manner.

The CMA has also relaxed disclosure obligations in relation to publication of financial statements in two newspapers of national circulation until 30 June 2020. It has directed that all required disclosures be published on the following platforms: company websites and social media platforms; the NSE website for all issuers and trading participants; and the CMA website by all entities affected by this guidance. Companies that do not face challenges in publishing the same in the newspapers are still encouraged to do so.

The CMA has clarified, however, that entities which are also regulated by other regulators are advised to engage with the relevant regulator(s) where an obligation may have been altered by these directives but affects their obligations under a different regime outside of the CMA’s mandate.

Can a public company delay its AGM?

Kenya - Anjarwalla & Khanna

The prohibition on public gatherings as mandated by the Government of Kenya means that companies, particularly publicly listed companies, will not be able to convene physical annual general meetings (AGM) during this period when the spread of COVID 19 is being controlled. As such, companies will need to postpone such general meetings or put in place contingency plans for convening an AGM.

On 18 March 2020, the Capital Markets Authority (the CMA) in a joint press release with the Nairobi Securities Exchange and the Central Depository and Settlement Corporation advised listed companies that planned on convening their AGMs in March, April and May 2020 to defer the meetings to a later date due to the ban on public gatherings.

In addition, the listed companies are required to ensure that stakeholders are informed accordingly.

Can non-listed companies delay their AGM? If so, what options are available if we are required to delay or postpone our AGM due to the COVID 19 pandemic?

Kenya - Anjarwalla & Khanna

For non-listed companies, contingency plans will need to be put in place and alternative ways of convening an AGM may be explored (for example, video-conferencing or telephone conferencing). However, any alternative methods would need to take into account if the constitutional documents of the company or any shareholders’ agreement permit participation through electronic means. In addition, there is still legal uncertainty as to the validity of a meeting held purely through virtual means.

For private companies, there is no mandatory requirement in the Companies Act to convene an AGM. In so far as the Companies Act and the constitutional documents and governance documents of a company permit, resolutions by a company which would have been passed at a general meeting could be passed by way of written resolutions.

For public companies, the Companies Act requires them to hold an AGM within 6 months after their accounting reference date. There has been no direction or guidance from the Registrar of Companies if the requirement to hold the AGM within 6 months will be waived or the period of time extended to hold the AGM. For now, public companies should hold off on sending out their AGM Notices until the last possible date. For those that have already sent out their AGM Notices, these may need to be supplemented to factor in the latest government and/or other communications as the situation evolves on the ground.

If a company wishes to postpone its AGM, it will only be permitted to do so to the extent that its Articles of Association permit it to do so. If a company does not have powers of postponement of the AGM, the company may have to consider adjourning the AGM.

As companies navigate through unchartered territory, it is vital that shareholders are kept apprised of information and updates so that they remain fully informed. The Board is responsible to its shareholders and any measures that are taken by way of contingency plans that affect shareholders must be reasonable, proportionate and necessary and allow participation of shareholders.

Is there an increased risk of insider trading for listed companies during the COVID 19 pandemic?

Kenya - Anjarwalla & Khanna

As listed entities navigate the issues and challenges arising from the COVID 19 pandemic, they should, as always, diligently act to mitigate the risks of insider trading, which may be enhanced at this time.

In the context of COVID 19, this may involve reinforcing internal trading policies; considering closed periods for trading; controlling dissemination of information internally; and ensuring relevant information is publicly announced promptly, in accordance with the listed entity's disclosure obligations under the Capital Markets Act (and the regulations thereunder) and the NSE Listing Rules.

Contacts

Arshad Dudhia

Arshad Dudhia

Managing Partner, Musa Dudhia & Co.

Fayaz Hajee Abdoula

Fayaz Hajee Abdoula

Partner, BLC Robert & Associates

Foued Bourabiat

Foued Bourabiat

Managing Partner, Bourabiat Associés

Francisco Avillez

Francisco Avillez

Managing Partner, ABCC

Fred Onuobia

Fred Onuobia

Managing Partner, G.Elias & Co.

Geofrey Dimoso

Geofrey Dimoso

Partner, A&K Tanzania

Jason Harel

Jason Harel

Partner, BLC Robert & Associates

Krishna Savjani

Krishna Savjani

Managing Partner, Savjani & Co.

Mesfin Tafesse

Mesfin Tafesse

Principal Attorney, Mesfin Tafesse & Associates

Romain Frédéric Rabillard

Romain Frédéric Rabillard

Partner, BFR & Associés

Rosa Nduati-Mutero

Rosa Nduati-Mutero

Partner, Anjarwalla & Khanna

Sahondra Rabenarivo

Sahondra Rabenarivo

Managing Partner, Madagascar Law Office

Salimatou Diallo

Salimatou Diallo

Partner, SD Avocats

Shemane Amin

Shemane Amin

Partner, A&K Tanzania

Timothy Masembe

Timothy Masembe

Managing Partner, MMAKS Advocates