Replacing a Director of a CMA-Licensed Firm in Kenya

Replacing a director is routine for most companies. For a firm licensed by the Capital Markets Authority it is a regulated event. The change cannot simply be minuted and filed. It needs the Authority’s prior written no-objection, a proper fit and proper assessment of the incoming director, and a filing with the Registrar after the change. This article sets out the sequence and the order in which it must happen.

Why the Authority must be asked first

Section 24(8) of the Capital Markets Act states that a licensed person shall not change its shareholders, directors, chief executive or key personnel without the Authority’s prior written no-objection. The word “prior” is the point: a board that appoints first and applies later has already breached the Act. For market intermediaries, regulation 3(3) of the Corporate Governance (Market Intermediaries) Regulations, 2011 adds that the composition of the board shall not be changed without the Authority’s prior written consent. Our article on independent directors of licensed firms explains that regulation in more detail.

What the Authority tests

Section 24A of the Act sets the suitability criteria. These look at the person’s integrity, competence and financial standing, and whether past conduct raises concern. For broker-dealers, the 2025 Licensing Requirements Regulations separately require every current or proposed director, chief executive and other key personnel to be fit and proper for the position. Expect to supply identification, a curriculum vitae, academic and professional qualifications, declarations on past conduct and clearances. The Authority’s published forms and guidance set the exact list, and they change, so take the current requirements from the Authority.

The sequence that works

1. Check the board arithmetic. If the outgoing director is independent, confirm the board stays at or above the one-third minimum, or time the change so it does.
2. Screen the candidate against the independence definition and fit and proper criteria before approaching the Authority.
3. Apply to the Authority with the candidate’s documents and the board’s reasons, and wait for the written no-objection.
4. Pass the board resolution, and the members’ resolution where the Articles require one.
5. Sign the appointment paper, with its start date tied to the no-objection. Our article on employment and office covers the contract choice.
6. File with the Registrar within fourteen days under section 138 of the Companies Act, 2015.
7. Arrange governance training within six months, as regulation 4 expects.

A note on timing: the Companies Act clock runs from the change, but the regulatory approval must come before it. Appointments conditional on approval, with the start date fixed once the letter arrives, solve the sequencing.

The Registrar filing

Section 138 requires notification of the change to the Registrar within fourteen days. In practice the filing is made through the Business Registration Service portal, and the company should confirm the current form and supporting documents on the portal when it files. The same filing is needed for the outgoing director, whether they resigned or were removed, which is the subject of our article on resignation and removal.

Common mistakes

• Appointing first and informing the Authority afterwards.
• Giving an independent seat to someone with a contract of service or a recent business link.
• Letting the notice period of the outgoing director overlap with a gap in board quorum or independence.
• Filing with the Registrar late because the regulatory approval took longer than planned.
• Describing a new director as non-executive in the Authority application and then giving them executive-style terms.

Planning around the approval

The Authority’s time to respond is outside the company’s control, so build slack into the plan. Where a director is leaving on a fixed date, start the candidate search and screening well before notice is given. Where the outgoing director holds an independent seat, discuss the gap with the Authority at the start, because the board composition rules are tested against the board as it will stand after the change.

Keep a single file for the transaction: the candidate’s documents, the Authority’s letter, the resolutions, the signed appointment paper and the Registrar’s acknowledgement. The file is the evidence of sequence if the Authority or the Registrar later asks when each step happened. It is also what a new company secretary will need, since filings and approvals of this kind are reviewed during inspections and licence renewals. Finally, make sure the new director’s terms match what the Authority was told. If the application described a non-executive role, the paper should not give executive-style pay, hours or reporting lines.

The short version

For a licensed firm, ask first and appoint second. Obtain the Authority’s written no-objection, make the appointment conditional on it, and file with the Registrar within fourteen days of the change. Test the board’s independence arithmetic before you start, and keep one file that shows the order in which each step happened.

Frequently asked questions

This article is general information on Kenyan law as at its publication date, not legal advice. Reading it does not create an advocate and client relationship.