A manufacturing business is a physical thing before it is a financial one, and the two liability categories that most often get underweighted in due diligence, environmental compliance and accumulated labour exposure, are exactly the ones that survive a change of ownership and land on the buyer’s desk after closing.
The environmental licence does not transfer automatically
Any manufacturing facility of meaningful scale operates under an environmental licence issued by the National Environment Management Authority under the Environmental Management and Co-ordination Act. That licence is transferable on a change of ownership, but only if both the outgoing and incoming owner jointly notify NEMA’s Director General in writing within thirty days of the transfer, and the transfer only takes legal effect from the date that notification is actually received. An acquirer who completes a deal without confirming this notification happens is, for a period, operating a licensed facility without a validly transferred licence, which is a real exposure if an inspection or a complaint triggers NEMA’s attention during that gap.
Check the compliance history, not just the current licence
A current, valid licence tells you the facility was compliant at its last review. It does not tell you about unresolved complaints, pending enforcement notices, or contamination from past operations that NEMA has not yet acted on. NEMA has the power to suspend, revoke, or refuse to renew a licence, and an acquirer needs to specifically ask for the facility’s inspection and complaints history, not just its current certificate, since environmental liability for contamination that occurred before the sale can still become the new owner’s problem to remediate once discovered.
Labour liabilities that outlive the transaction
Where an acquisition is structured as a transfer of the business and its employees rather than a pure share sale, existing employment terms, accrued leave, unpaid overtime, and any pending disciplinary or termination disputes typically transfer with the workforce rather than disappearing at closing. Review the target’s Work Injury Benefits Act compliance and claims history, since unresolved workplace injury claims are a common, easily overlooked liability in a facility with manual or machine-operated processes. Confirm NSSF and SHIF contributions are genuinely current rather than technically compliant on paper, since arrears here become the new owner’s obligation to resolve.
Machinery, land use, and licensing that all have to line up
Confirm the facility’s physical operations actually match what its licences describe. A manufacturing line that was expanded or repurposed without a corresponding update to its EIA licence or county planning approvals is a real compliance gap, not a technicality, and one that a physical site visit combined with a document review will usually catch faster than financial due diligence alone. Land tenure matters here too: confirm the facility sits on land the target actually has clean rights to operate on, with any lease terms surviving the change of ownership on the terms you expect.
Build the timeline around the notification requirement
Because the NEMA licence transfer only takes effect once notified, build that joint notification into the transaction’s completion mechanics rather than treating it as post-closing administration. A deal that closes on a Friday with the NEMA notification filed the following month has left the facility operating in a genuine legal grey area for that entire gap, which is an avoidable risk with no real cost to closing it properly.
