The Capital Markets Authority (CMA) has been barred from directing or recommending selection of directors at publicly listed firms, weakening the regulator’s powers to enforce corporate governance.
In a case brought by Limuru Tea Plc, the Capital Markets Tribunal ruled that the appointment and removal of directors remain the exclusive preserve of shareholders, who exercise this authority during annual general meetings (AGMs), effectively clipping the CMA’s influence on the internal affairs of listed firms.
The CMA had found that Limuru Tea’s board lacked the right mix of directors, noting that minority shareholders were underrepresented and that some members lacked critical agricultural skills for a listed agricultural company.
The authority recommended restructuring the board to cure these deficiencies.
However, the tribunal bristled at the recommendation, noting that it implied the CMA had “a duty to appoint a director specifically for one shareholder,” a move that “exceeded the boundaries of the [Code of Corporate Governance Practices for Issuers of Securities to the Public, 2015] and cannot stand.”
“Directors are not appointed as agents of specific shareholders but as fiduciaries for the company as a whole,” said the tribunal in a judgment made by the five-bench tribunal on September 4, 2025.
“Sections 142–146 of the Companies Act 2015 affirm that directors’ duties are owed to the company, not to blocs of shareholders,” added the judgment.
Africa Reit, owned by businessman Wainaina Kenyanjui, had argued that a combination of his shares together with those of the late tycoon Joe Wanjui took his shareholding in Limuru Tea to 27.31 percent—making him the third-largest shareholder and therefore entitled to a seat on the company’s board.
Before the matter was referred back to the tribunal, Africa Reit had moved to the High Court to block the transfer of Unilever’s majority stake in Limuru Tea and to stop a US-based private equity firm from buying out minority investors in the firm, disrupting the Sh596.7 billion ($5.1 billion) global deal.
The CMA refused to approve the offer from private equity firm CVC Capital Partners seeking a full buyout of Limuru Tea’s minority owners, including Mr Wanjui, in the wake of the shareholder fights at the firm, saying it was waiting for the conflict to be resolved.
In its Corporate Governance Assessment Report, the CMA put Africa Reit’s shareholding in Limuru Tea at 27.31 percent, irking Limuru Tea’s management, which insisted the real estate firm’s stake was a paltry 4.6 percent—insufficient for a board seat entitlement.
Limuru Tea reckoned that the late Wanjui and Africa Reit were independent of each other.
It sought to have the statement that Africa Reit was a significant shareholder expunged from the final Corporate Governance Assessment Report.
The CMA had recommended restructuring Limuru Tea’s board to reflect a shareholding pattern in which minority shareholders are also represented in the boardroom of the Nairobi Securities Exchange-listed agricultural firm.
However, the tribunal noted that the markets regulator could not make such a call and faulted the CMA for relying on media reports to conclude that there was no fair representation on the board.
The court fight offered a rare peek into Limuru Tea’s jealously guarded boardroom secrets and Mr Wanjui’s ownership, which for decades had remained masked under the Standard Chartered Nominees account.
The CMA argued that Africa Reit was Limuru Tea’s third-largest shareholder after Unilever Tea Kenya and Mr Wanjui’s Standard Chartered Nominees, and maintained that the board’s composition failed to give effect to Clause 2.1.3 of the Code of Corporate Governance Practices for Issuers of Securities to the Public (2015), which requires boards to equitably reflect shareholding structures, including protection of minority interests.
“On the shareholder representation, however, we diverge from the Respondent (CMA). Directors are not appointed as agents of specific shareholders but as fiduciaries for the company as a whole,” the tribunal said.
“While the Code urges boards to exercise judgment in determining representation… effectively reflecting the shareholding structure, it does not compel appointment of directors to serve as delegates of particular shareholders. To suggest otherwise risks reducing directors to mere nominees, contrary to settled law and principle.”
The CMA also faulted the company’s board skills, arguing that although the board possessed expertise in veterinary science, agriculture, human resources and finance, it lacked independent or non-executive directors with specialised agricultural expertise—undermining effective sectoral oversight—and recommended a reconstitution of the board to include such expertise.
The company rejected the finding that its board lacked relevant expertise, asserting that the skills mix—including veterinary science, agriculture, human resources, procurement and finance—sufficiently aligned with the Code’s requirements.
The tribunal, however, noted that Limuru Tea had produced evidence of qualifications in agriculture, veterinary science, human resources and finance across its board members.
“While we accept that deeper agricultural expertise could enhance oversight, we find that the Respondent’s [CMA’s] conclusion was overstated. The Appellant (Limuru Tea) substantially met the requirement of Clause 2.2.1 during the year under review,” the tribunal said.
The tribunal found—and Limuru Tea agreed—that 50 percent of the directors were executive, contrary to the requirement that a majority (50+1 percent) be non-executive. Limuru Tea said it was still scouting for an independent director.
