A Tribunal has ruled that the Capital Markets Authority (CMA) acted improperly by relying on press coverage in its evaluation of Limuru Tea PLC’s corporate governance, declaring that regulators must base findings on verifiable evidence rather than mere media reports.
- •The case arose after CMA’s 2021 Corporate Governance Assessment Report flagged several weaknesses at Limuru Tea, including the composition of its nomination committee, the balance of executive and non-executive directors, board skills, conflict of interest policies, and oversight of related-party transactions.
- •The report also cited adverse newspaper stories as evidence of non-compliance but Limuru Tea appealed and argued that the findings were factually inaccurate and damaging to its reputation.
- •On the substance of the assessment, the Tribunal upheld CMA’s finding that Limuru’s board was not compliant in 2021, since it lacked a majority of non-executive directors and its nomination committee did not meet the required independence threshold during the review period.
CMA had defended its position by saying the assessment was consultative and designed to guide improvements, not punish issuers. It further argued that its observations were correct as of the end of 2021 and insisted that media reports were used only as risk indicators.
CMA also questioned whether the Tribunal had jurisdiction to hear the matter, claiming the report was not a binding decision.
The Tribunal rejected that view, finding that governance assessments are determinations under the Capital Markets Act and therefore appealable. It held that such reports have real consequences for investor confidence and cannot be insulated from scrutiny.
“The Capital Markets Act itself equips the Respondent (CMA) with robust investigatory powers under Sections 13A, 13B, and 22B: the power to summon information, to search, to investigate, and to intervene where market integrity is threatened. When armed with such instruments, why resort to the speculative pen of journalists?” the Tribunal ruled.
“Corporate governance assessment is meant to be a constructive, truth-seeking, and collaborative process. By leaning on media reports, CMA strayed from its statutory mandate and undermined the very trust that gives such assessments legitimacy,” the Capital Markets Tribunal stated.
While the Tribunal agreed that Limuru Tea’s board was not compliant, it said CMA overstated other deficiencies, noting that Limuru’s board did in fact possess relevant skills in agriculture, veterinary science, human resources, and finance — contrary to the regulator’s findings.
The court also said the regulator overstepped by suggesting company boards should reflect shareholder groups, emphasizing that directors must act in the best interest of the company, not just for specific investors.
“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,” the ruling stated.
The Tribunal also overruled CMA’s concerns about Limuru’s CEO, seconded from majority owner Unilever. It said just because a conflict could happen doesn’t mean it has, and that Limuru’s rules for dealing with related-party deals were fine.
The ruling clarifies that corporate governance assessments, once thought to be consultative, can be challenged in law, and establishes a precedent that regulators must build their cases on evidence rather than reputation shaped in the press.