Capital Markets Tribunal faults CMA for using media reports in Limuru Tea governance review 

KENYA – The Capital Markets Tribunal has ruled that the Capital Markets Authority (CMA) acted improperly by relying on press coverage to evaluate Limuru Tea PLC’s corporate governance, emphasizing that regulators must base findings on verifiable evidence rather than media reports. 

The ruling stems from Limuru Tea’s appeal against the CMA’s 2021 Corporate Governance Assessment Report, which highlighted alleged weaknesses in the company’s board structure, nomination committee, conflict of interest policies, and oversight of related-party transactions.  

The report also cited adverse newspaper stories as supporting evidence of non-compliance. Limuru Tea challenged the findings, arguing that they were factually inaccurate and damaging to its reputation. 

On the substance of the governance review, the Tribunal upheld CMA’s conclusion that Limuru Tea’s board was non-compliant in 2021 because it lacked a majority of non-executive directors and its nomination committee did not meet the required independence threshold during the review period. 

CMA defended its assessment by stating it was consultative and intended to guide issuers toward improvement rather than impose sanctions. The regulator maintained that media reports were used only as risk indicators and that its observations reflected the position at the end of 2021.  

CMA also argued that the Tribunal lacked jurisdiction because the governance report was not a binding decision. 

The Tribunal rejected this position, holding that corporate governance assessments have significant consequences for investor confidence and therefore fall under determinations that can be appealed.  

It noted that CMA possesses strong investigatory powers under the Capital Markets Act, including the ability to summon information and conduct inquiries, and should not rely on speculative press coverage. 

“Corporate governance assessment is meant to be a constructive, truth-seeking, and collaborative process,” the Tribunal stated. “By leaning on media reports, CMA strayed from its statutory mandate and undermined the very trust that gives such assessments legitimacy.” 

While confirming certain non-compliance findings, the Tribunal said CMA overstated other deficiencies. It noted that Limuru Tea’s board did possess relevant expertise in agriculture, veterinary science, human resources, and finance, contrary to CMA’s conclusion.  

The Tribunal also ruled that regulators cannot compel boards to reflect shareholder groupings, emphasizing directors’ duty to act in the company’s best interests. 

In addition, the Tribunal dismissed CMA’s concerns regarding Limuru Tea’s CEO seconded from majority owner Unilever, stating that potential conflicts do not equate to actual conflicts. 

The decision clarifies that corporate governance assessments are legally challengeable and sets a precedent requiring regulators to rely on verified evidence rather than reputation shaped by media coverage. 

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