Why government tenders may soon not be awarded to close relatives and friends

State officials and senior company executives may now find it hard to award tenders to their relatives

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The irregular awarding of tenders to relatives and friends has become a far too common routine among Kenya’s listed companies.

This has given rise to a crop of entrepreneurs who have made money through government tenders raising more questions than answers with regards to the tendering process.

But the latest Bill might just make it harder for state government officials and senior company executives to dish out tenders to their relatives.

The Companies Act currently requires directors to declare their relations, including spouses, parents, children and step-children.

The Companies Amendment Bill (2017), however, proposes to expand this circle to include in-laws, grandchildren, and siblings. The husbands and wives of grandchildren are also to be included in this definition of family.

The law, sponsored by National Assembly Majority leader Aden Duale, restricts the business that companies can transact with family members of directors over fears that such deals might be corrupt and not in the best interest of shareholders.

Directors are required to disclose to shareholders any potential conflicts of interest that may arise in a transaction due to their personal or professional relations.

While company boards can usually waive conflict of interest concerns, the new law would make directors jump through more hoops to get such authorizations.

Directors that fail to disclose conflicts of interest will no longer use ignorance of the conflict of interest as a defence.

Those who fail to comply with these regulations may be required to indemnify the corporate of any damage or loss suffered. Failing to disclose potential conflicts of interest could see directors disqualified for up to five years

In addition, the Kenyan companies will be required by the proposed law to keep an updated list of members that includes details about beneficial owners.

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