The banking sector regulator has ordered all lenders to disclose their top shareholders on their websites in fresh efforts to improve corporate governance in the industry.
The banking sector regulator has ordered all lenders to disclose their top shareholders on their websites in fresh efforts to improve corporate governance in the industry. A majority of Kenyan banks — which keep their shareholding secretly guarded — are now racing to beat the August 1 compliance deadline set by Central Bank of Kenya (CBK) governor Patrick Njoroge. Dr Njoroge said Wednesday banks must reveal on their websites and update periodically a share register of those who hold at least five per cent shares of the lender.
The directive is expected to lift the corporate veil on banks that have over the years kept their ownership closely guarded. The CBK also plans to introduce term limits for bank chief executives and non-executive directors, Dr Njoroge said, arguing that this measure is aimed at strengthening the governance of Kenyan banks.
“Greater transparency in ownership will ensure public confidence,” he said at a briefing in Nairobi.
Dr Njoroge added that unlimited directorship tenures “breed complacency”. The transparency and governance rules come in the wake of the collapse of three lenders —Dubai, Imperial and Chase banks — precipitated by weak corporate governance practices that allowed for irregular issuance of loans to politically connected persons, wanton insider lending and running of parallel banks.
Governor Njoroge is a skilled reformer, he is reforming the banking industry step by step. Revealing the banks owners is just one step, the next one he mentioned is term limits for directors and managers which is long overdue and then finally special audit on the banks loan books to reveal their real value.
Entity cannot be owned by entities and entities. There is always a person who owns that entity, the Primary owner and that person who owns it must be listed. That has been made clear to the banks. For example if Kenyatalk sacco owns +5% of KCB then the majority owner or director of it must be listed in KCB website.
yes it can, @spear can be a majority share holder in entity A, entity A then buys stake in entity B which has interests in entity C which controls bank X
I have read the article. What CBK want is for banks to publish on their website the shareholders who own more than 5%.
So if Kenyatalk owns 5% of KCB, this should be published on the website of KCB. However,there is no requirement to publish who owns Kenyatalk. It is even impossible to do so.
Lets use a practical explanation. Spear investments owns +5% of Equity Bank (true story by the way). Lets check on Spear listing at state law, the directorship can be 1 person thanks to the amended Company Law 2016 or more. Lets looks at the shareholding of the companies, Director Jimmy 51%, Director Virus 24% and Okiya law firm 1% (pull up your socks man) So CBK will want Director Jimmy listed as majority owner of Spear Investments since without his signature nothing in that account can move on despite the others shareholders agreement or not. Scenario two if all shareholders are many like 50,000, possible if its a sacco then the elected chairman of the company will be listed on behalf of all shareholders. So here Equity will list Director Jimmy as elected Chairman of Spear investment and still give the memorandum of association of Spear investment listing its 50,000 individual shareholders names and share numbers. Scenario three, Spear investments has a bank account here to receive its dividend every financial year. Who are the signatories, they gave the KRA pin and identification papers to the bank. The owner has to be one otherwise even the nominal signatory can easily steal the money and you have no legal claim against them. In other words even if the true owners tries to hide behind entities follow the shareholding or the money through banking details. The owner can’t give up 51% of shareholding to a nominee director and signatory as well, that will be suicidal. How will you prove the company belongs to you?
CBK is not asking, its demanding it through its regulation oversight role and therefore its compulsory by law.
So if during the year, Director Jimmy sells his shares to Mr. X. how will Equity Bank know of the change so that they can update their website? Will Equity Bank be calling their top shareholders daily to know whether directorship has changed?
The share registry can change daily for example if the company is listed in NSE. Yes each time the directorship/shareholding changes it must be updated. It can’t be a secret, after all it has to be done officially at state law office. 1% of bank shareholding is billions so no one will accept just a simple handshake deal that can’t be proved or easily contested. The changes will also be visible during board meetings when a new person shows up at the meeting.