Why the Act matters for businesses

For businesses, this Act is not just a governance or compliance issue affecting public officers, rather, it is a commercial risk factor. The provisions of the Act touch on company ownership, contracting eligibility, disclosure of business interactions and recruitment practices. Violations could lead to contracts being voided, heavy fines, reputational harm or exclusion from future procurement processes. On the other hand, compliance with the Act may strengthen investor and public confidence in companies operating in Kenya’s public sector market.

Key provisions affecting businesses

Restrictions on government contracts

The Act prohibits public officers from being parties to, or beneficiaries of, contracts for the supply of goods, works, or services with their own institutions. It also bars them from influencing the awarding of contracts in which they hold a private interest, and further bars them from influencing the awarding of contracts in which they hold a private interest. While this aims to safeguard procurement integrity, it potentially overreaches as companies with complex or international shareholder structures may find it practically impossible to exclude all indirect links to public officers. This means companies must not only avoid engaging in procurement arrangements where a serving public officer – directly or through relatives or proxies – has a stake, but also shoulder a heavy compliance burden in mapping and disclosing ownership. In practice, this will require stronger shareholder due diligence, disclosure of beneficial ownership, and proactive compliance checks before tendering, though the absence of clear thresholds creates uncertainty for businesses. Businesses that inadvertently contract with government entities through conflicted arrangements risk their contracts being challenged or nullified, with penalties attached, even in cases where no actual abuse of office has occurred.

Ownership and shareholding scrutiny

The Act also restricts public officers from acquiring ownership interests in companies that contract with government entities, except for passive interests through regulated securities markets without control. This provision is significant for businesses because it closes a common loophole where public officers held shares through nominees or family members. Companies bidding for government contracts should expect that beneficial ownership registries maintained under the Companies Act will be cross-referenced with conflict registers maintained by reporting entities. Failure to disclose such interests could expose companies to investigation and penalties, even if the public officer’s holding is indirect. This creates a heightened expectation for companies to map out their shareholder structures and identify potential red flags early.

However, the Act does not specify thresholds for what qualifies as a “private interest”, which leaves scope for retrospective findings that even minimal or passive holdings could disqualify an entity, creating legal uncertainty.

Mandatory disclosure and public registers

A central innovation of the Act is the obligation for each reporting authority (including Parliament, county assemblies, constitutional commissions such as the Judicial Service Commission, the Public Service Commission, Teachers Service Commission, county public service boards, national security institutions, and other bodies established under the Constitution or law as designated by the Commission) to maintain public registers of conflicts of interest, gifts, and complimentary treatment. These registers will capture details of benefits offered to public officers – including corporate gifts, hospitality, training opportunities or sponsorships.

For businesses, this means that what was previously informal or opaque in government relations will now be formally recorded and potentially accessible to the public, but only subject to the Access to Information Act and, in the case of declarations, upon application showing legitimate interest. The reputational risk is therefore two-fold: not only could improper benefits trigger investigations, but also legitimate gifts may draw scrutiny if they appear excessive or unusual. Companies must revisit corporate hospitality policies, set monetary limits aligned with the Act, and train staff to avoid offering benefits that could later be seen as attempts to unduly influence officials.

While the disclosure framework is ambitious, questions remain as to its robustness. The Act requires reporting authorities to maintain registers but does not prescribe uniform formats, thresholds or centralised oversight. This may result in inconsistent record-keeping across authorities and leave gaps in comparability and enforcement. The absence of numeric limits for permissible gifts or hospitality also risks uncertainty, with even trivial benefits potentially raising red flags once published. Thus, while the framework enhances transparency on paper, its effectiveness in deterring undue influence depends heavily on implementation quality and consistent practice among diverse reporting authorities

Restrictions after public service (cooling-off period)

The Act imposes a mandatory two-year cooling-off period for former public officers, barring them from joining, advising or representing private entities that had significant dealings with their previous offices. They are also prohibited from using non-public information gained in office for private benefit. This provision is intended to curb “revolving door” risks but has practical consequences for businesses. Companies in regulated industries – such as infrastructure, energy, health or insurance – must be especially cautious when hiring former regulators or senior officials, as appointments could be challenged or attract EACC scrutiny. Exceptions are possible, but only upon written exemption by the EACC, which will likely be rare. Businesses should therefore factor these restrictions into recruitment and board appointment strategies.

Critically, the rigidity of this restriction could deprive industries of scarce technical expertise. Without clear exemption processes or consistent application, businesses in heavily regulated sectors risk losing access to valuable skills, potentially slowing growth and innovation

Increased compliance and enforcement powers

The Act significantly strengthens the powers of the EACC. The EACC may now verify asset and interest declarations, demand clarifications and initiate investigations on its own motion or through public complaints. For businesses, this means that any transaction linked to a conflicted public officer can trigger a regulatory investigation, potentially exposing the company’s records and dealings to scrutiny. Penalties are also steep: individuals face fines up to USD 31,007.75 or imprisonment of up to 10 years, while corporations face fines up USD 77,519.38. In addition, the Act provides for mandatory forfeiture of benefits gained from conflicted transactions – meaning that even profits earned under a tainted contract can be clawed back. This raises the stakes for compliance failures and requires businesses to strengthen their internal audit and legal oversight over government-linked contracts.

However, concentrating broad discretion in a single enforcement body without clear safeguards raises risks of overreach. Although the Act sets a 90-day timeline for concluding investigations, extensions are possible by court order, which could prolong uncertainty for businesses.

Heightened due diligence expectations

Taken together, the above provisions of the Act create a new compliance environment where businesses must adopt enhanced due diligence frameworks. Companies engaging in public procurement or partnerships will need to conduct thorough ownership checks, strengthen internal approval processes for gifts and sponsorships, and align their codes of conduct with the Act. This will also affect consortiums and joint ventures in public-private partnerships, as each partner’s ownership and compliance posture could affect the consortium’s eligibility. Global investors and multinational companies operating in Kenya may find that the Act aligns with international anti-corruption and governance standards, but local partners must quickly upgrade compliance systems to avoid creating liabilities.

The Act heightens due diligence expectations but does not provide clear guidance on what constitutes “adequate” compliance. This vagueness exposes businesses to the risk of retrospective enforcement, where practices deemed sufficient today may later be judged non-compliant. The lack of official benchmarks may also fuel inconsistent expectations between regulators and companies, undermining certainty in procurement and partnerships.

Lessons for businesses

Businesses should take immediate steps to align with the new conflict of interest framework by reviewing their ownership and governance structures to ensure that no serving public officer has an undisclosed stake that could jeopardize contracts with government entities. Also, updating internal compliance policies on gifts, hospitality, sponsorships, and recruitment is equally critical, as any interaction with public officers is now subject to stricter disclosure and public scrutiny, with significant reputational and legal risks for non-compliance. Companies should also introduce conflict-of-interest checks in procurement processes and conduct enhanced due diligence when partnering with or acquiring entities that deal with the public sector, as liability can extend beyond individuals to corporate partners. Finally, businesses must be prepared for closer oversight by the EACC, making it essential to establish systems that enable timely, transparent, and accurate responses to regulatory inquiries – measures that will not only reduce exposure to penalties but also build long-term trust and competitiveness in public sector engagements.

Nonetheless, the compliance environment remains unsettled. Expectations are high while interpretive guidance is sparse, meaning businesses must watch early enforcement actions and EACC advisories closely to understand how the Act will actually be applied in practice.