Electricity producer KenGen wants to amend its internal rules to grant the government board control, irrespective of its shareholding, mirroring a similar move at Kenya Reinsurance Corporation (Kenya Re).
The proposal, which is set to be considered by shareholders at an extraordinary general meeting (EGM) on February 12, will entrench the State’s influence over board composition and decision-making at the Nairobi Securities Exchange-listed firm even if its stake falls below current 70 percent.
The planned changes will be introduced through amendment to its Articles of Association to give the State superior class of shares that guarantee it a majority of board seats and control over the appointment of the CEO.
Articles of Association refers to a company's internal rulebook that outlines how the business will be run, managed and governed.
The document defines the roles, responsibilities and rights of shareholders, directors and other stakeholders.
If approved, the proposals will see KenGen constitute class A and B ordinary shares.Class B shares will be those held by the Treasury Cabinet Secretary on behalf of the government, while class A will be those in the hands of the rest of the power generator’s shareholders.
According to the proposal, the State’s class B shares will entitle it to elect six directors to the board, while the rest of the shareholders will be entitled to two directors through their class B shares.
The company said in a notice on Thursday, the changes will provide “fair representation” of the majority and minority shareholders in the board whose membership will be cut to nine from the current 11.“
The holders of class A and B shares shall have the same rights and privileges except with respect to nomination and election of directors,” reads the proposed changes to the Articles of Association.
KenGen’s move closely matches what Kenya Re has proposed to shareholders ahead of its EGM on February 11.The reinsurer’s shareholders will vote to grant the government board control through class B shares and also cap the CEO’s tenure at a maximum of two terms of three years each.
The changes, if approved, would ring-fence government influence at the two companies irrespective of how the shareholding evolves over time, allowing it to maintain strategic oversight while still tapping capital markets for funding.
The proposed shareholding model in the two companies mirrors that of many private sector companies in developed markets such as the United States and the United Kingdom, where board control has been delinked from shareholding through differentiated voting rights and shareholder agreements.
Companies such as Alphabet (Google's parent company), Meta Platforms (Facebook's parent company), and Berkshire Hathaway operate dual-class share structures that put control in the hands of a few shareholders, often founders.
KenGen has in recent years embarked on large-scale geothermal and renewable energy projects, requiring substantial capital investment.
