Under these current provisions, no person is permitted to control or beneficially own more than one-third of the issued share capital or voting rights of a market intermediary. Similarly, no individual or entity may appoint more than one-third of the board of directors or receive more than one-third of the aggregate dividends and interest on shareholder loans in any given year. These restrictions, however, do not apply to companies licensed by a banking, insurance or pensions regulator in Kenya or elsewhere as long as their licence imposes similar restrictions in relation to majority shareholding.

In addition, the Act prohibits persons who exercise control or are beneficially entitled to more than 25% of the share capital or voting rights, or who are capable of appointing a quarter of the board or receiving a quarter of the aggregate dividends, from serving as executive directors or senior managers of such market intermediaries. 

These restrictions were introduced to address important policy concerns. First, they were aimed at preventing the concentration of ownership and control in the hands of a few individuals or entities, which could undermine fair competition and market stability. The requirements also promoted accountability by ensuring that directors and decision-makers of market intermediaries were not dominated by controlling shareholders who could pursue narrow interests at the expense of broader market integrity. When these provisions were first introduced, shareholders and directors who exceeded the limits were given a transitional period within which to comply.

The proposed amendment

The Capital Markets (Amendment) Bill, 2025 (Bill) has been introduced in Parliament with the objective of modernising Kenya’s capital markets framework and attracting more investment in licensed market intermediaries. A key proposal is the repeal of subsections (4) to (7) of section 29 of the Act, which currently prescribe the shareholding and governance thresholds.

By removing these requirements from the principal legislation, the Bill transfers the responsibility for setting ownership and directorship limits to subsidiary regulations to be issued by the Cabinet Secretary for the National Treasury in consultation with the Capital Markets Authority (CMA). This represents a shift towards a more flexible, principles-based regime where the Act establishes the overarching framework while detailed thresholds are set out in regulations that can adapt more readily to market realities.

For market intermediaries, the implications of this shift are twofold. On the one hand, the Cabinet Secretary and the CMA will have greater regulatory flexibility to craft sector-specific rules on shareholding and licensing, which could enhance the stability and resilience of the market. On the other hand, businesses may face a period of uncertainty until the Cabinet Secretary issues new regulations. Further uncertainty may arise if the Cabinet Secretary frequently changes the rules to suit evolving market dynamics.

Market intermediaries and prospective investors may need to revisit their ownership and corporate structures should the Bill pass and the regulations be put in place, as compliance thresholds are likely to change. The proposed reform will also bring Kenya’s approach closer to international practice, where regulators often prefer to regulate shareholding, governance and licensing criteria through delegated legislation rather than rigid statutory provisions.

Conclusion

Ultimately, the Bill reflects a policy shift towards a more dynamic and adaptable regulatory environment for Kenya’s capital markets. While it promises greater flexibility and closer alignment with international practice, repealing of the current statutory limits raises transitional concerns. To avoid a governance vacuum, the Bill could usefully include transitional provisions that preserve the existing limits until the regulations are in place. Without such safeguards, there is a risk of excessive concentration of ownership and control in the interim – the very policy concerns that the current restrictions were designed to guard against.

Looking ahead, much will depend on how restrictive or permissive the forthcoming regulations turn out to be. If they are drafted with significantly lighter thresholds, the dangers the existing limits sought to mitigate may resurface on a more permanent basis, with controlling shareholders able to dominate governance and pursue narrow interests at the expense of broader market integrity.

In the meantime, licensed market intermediaries and prospective investors should closely monitor developments and begin reviewing their ownership and governance structures to anticipate the potential impact of the forthcoming regulations.