The Company (Amendment) Act of 2017 — A legacy that protects the rights of minority shareholders
It was sometime in the heydays of the early 1980’s when my father an accomplished young Industrial Pharmacist decided to retire from his well paying job at a multinational drug company and go into private enterprise. As one of the first registered African Pharmacist in a fledgling nation, Daktari as he was fondly known was a pioneer in his own right. The first from his community to achieve a college degree. The first among many brilliant Africans who left the continent on post independence airlifts to the West with the promise of returning to build for the first time a country born of a proud resistance against colonial rule. As Factory Manager he developed the first African products that have since become household names such as B-Kubwa, Cofta and Haliborange. Brilliance can only understate his ability. It was against this backdrop that he decided to branch out on his own with two of his trusted friends who invested in one of Nairobi’s first wholly African owned pharmacies. But what began as a success story, quickly deteriorated into a failed enterprise after his two trusted partners sold their shareholding behind his back leaving my father nearly penniless and jobless. The story goes that he was on a business trip in Europe or maybe it was West Africa when his associates connived to sell the company without his knowledge or approval. Apparently they sealed the deal by presenting him with a bounced check of sh. 230,000 or some amount which in those days was a colossal sum of money. It was many years before he would fully recover.
As a child I only vaguely recall that we suddenly stopped visiting Dad at his white medicine shop in the middle of town. I loved those excursions because it always meant a hearty lunch of fries at Wimpy down the street. But as I grew up I pieced together that Dad was indeed somehow fleeced by his associates. He never spoke about this era of his professional life, but many times over the years he would tell me nostalgically that “fathers have sons to redeem their legacies”. I always interpreted that to mean that one day I would grow up in stature and return to hound the two characters that swindled him of his company, livelihood and career to their graves. This notion was summarily cut short within a few years on watching the funeral of one of these characters on TV who had since become an influential political figure. And as fate would have it the second swindler also expired prematurely shortly after. So then I was left musing — how does one settle a vendetta with the deceased. I concluded as one of my friends puts it — Karma has no menu, you get only what you deserve. Perhaps these were learning experiences to instruct us of what never to do.
I may have eventually forgotten and stopped trying to make sense of the tragedy of my Dad’s career choices until an opportunity to lead work in public sector reforms in Kenya arose. One of the key reform areas was on the corporate governance but specifically on legal provisions touching protections against malfeasance by majority shareholders against minority shareholders. It turns out that during the time my father ventured into entrepreneurship, the Company Act passed 35 years earlier in 1948 had all manner of loopholes that allowed for unethical and oppressive conduct by majority shareholders that could lead to dilution of minority shareholding, sale of company assets or shares without disclosure, related-party transactions which essentially meant that transactions with conflicts of interests were overlooked even if they were prejudicial to minority shareholders. It meant that in 1980’s when my fathers business partners colluded in his absence to dilute his shareholding the law neither required that they notify him of the prejudicial transaction, the conflict of interest therein nor imposed stiff penalties against them for this unscrupulous behavior. Add this to the fact that the two conspirators were Advocates — one who later rose to the helm of the Judiciary by cosing up to the tyrannical regime of the time! A few weeks ago while waiting to have a meeting at the Supreme Court Building in down town Nairobi I came upon a grand faded portrait of this man proudly displayed in the visitors atrium with some high sounding jurisprudential quote emblazoned next to his name — and I thought “my foot!”. As I stared at his beady eyes I was overwhelmed with both resentment and resolve.
The last conversation I had with my Dad who peacefully passed on a few months ago was on his experiences in business and further I spoke about this in my eulogy to him. He was in these last treasured moments uncharacteristically forthcoming about his life. Subsequently, I was finally able to reconcile his career mishaps by accepting that while I could not return a lifetime of lost potential in business deals gone awry, I had found an opportunity that could fix the fault in the system that allowed this misfortune to happen not only to him but evidently to an entire generation of aspiring indigenous entrepreneurs in Kenya through the 1960’s to date who likewise through no fault of their own, failed to achieve their potential.
The Company (Amendment) Act of 2017 which I have played a central role in developing over the past year seals the loopholes that allowed for non-disclosure and participation in conflict of interest transaction by majority shareholders. The new law imposes strict reporting requirements for any transactions involving relatives or associates and steeper penalties for participation in corporate malfeasance. Quite simply if Dad was alive to attempt his venture again in 2017 maybe…just maybe — fortune would favor his brilliance and enterprise as opposed to fate providing avenues for mischief to his philandering associates.
Martin Luther King once poignantly said that the arc of the moral universe bends towards justice. I take comfort in the fact that with this law my fathers homeland Kenya that denied him a just and fair playground in his lifetime will have inched just a little closer towards justice and a better business environment for shared prosperity into posterity.
You can read the law here:
Originally published at https://www.linkedin.com.
