The Government Owned Enterprises Bill, 2025

The Government Owned Enterprises Bill, 2025, aims to reform the management and operation of state-owned commercial entities in Kenya. Its principal objects include establishing an effective ownership regime and legal framework, fostering governance structures that support commercial objectives, enhancing accountability, and providing incentives for GOEs to operate on commercial principles.

Key Provisions of the Bill:

Part I – Preliminary

• Definition of a GOE: A Government Owned Enterprise is defined as a legal person primarily owned and controlled by the national government (over 50% share capital), with financial and operational powers to conduct business, supplying goods/services commercially, and financed substantially without annual parliamentary appropriations or taxes.
• Application: The Act applies to GOEs established under the Companies Act and existing GOEs listed in the First and Second Schedules. It explicitly excludes state corporations established for non-commercial purposes.
• Role of Cabinet Secretary (National Treasury): The Cabinet Secretary for the National Treasury holds significant oversight, including determining GOE establishment, holding shares in trust, nominating independent directors, entering into performance contracts, designing incentive systems, evaluating performance, and assigning public service obligations.

Part II – Procedure and Criteria for Establishing a Government Owned Enterprise

• Establishment Principles: New GOEs must fill a market gap, operate on commercial principles, have defined commercial income streams, and avoid duplication of functions within the government.
• Process: A Ministry proposing a new GOE must submit a detailed business case to the Cabinet Secretary for the National Treasury, including a feasibility assessment, financial viability, and justification. Cabinet approval is mandatory.

Part III – Management of Government Owned Enterprises

• Board of Directors: Each GOE will have a Board comprising a chairperson, six independent directors, two public officers, and the Chief Executive Officer (as an ex-officio, non-voting member). Independent directors are nominated through a structured and competitive process by the Cabinet Secretary for the National Treasury, involving a selection panel.
• Qualifications and Disqualifications: Specifies criteria for appointment to the Board and the selection panel, including professional experience and integrity, while listing disqualifying factors such as bankruptcy, political affiliation, or conflicts of interest.
• Role of the Board: Responsible for appointing/removing the CEO, setting staff terms, strategic direction, approving budgets, setting performance indicators, risk governance, internal controls, and succession management.
• Remuneration: Directors' remuneration, including fees, sitting allowances, and performance-based bonuses, is governed by guidelines issued by the Cabinet Secretary for the National Treasury.
• Audit Committee: Boards must establish an audit committee, majority of whom must be independent directors, to oversee internal and external audits, safeguard assets, and ensure robust internal controls.
• Chief Executive Officer (CEO): Competitively recruited and appointed by the Board for a renewable three-year term, responsible for day-to-day management. Specific qualifications and grounds for removal are stipulated.

Part IV – Performance

• Business Plan: GOEs must adopt annual business plans based on their strategic plans, which form the basis for performance contracts signed with the Cabinet Secretary for the National Treasury.
• Performance Management and Evaluation: The Cabinet Secretary for the National Treasury is responsible for evaluating GOE performance, ensuring long-term sustainability, return on investment for shareholders, and minimizing fiscal costs. Boards evaluate their CEOs, and incentive systems for both Boards and staff are to be developed.

Part V – Public Service Obligations (PSOs)

• Definition: PSOs are defined as activities that are not commercially viable for the GOE but are assigned by the National Treasury, arising from a public directive. They must be separately costed, accounted for, audited, and time-bound.
• Implementation: Ministries may propose PSOs, which require Cabinet approval. PSO agreements must be written, approved by Cabinet and the GOE Board, include funding provisions, specify services, estimated costs, and monitoring mechanisms.

Part VI – Reporting and Disclosure

• Reporting: GOEs are required to submit quarterly and annual reports to the Cabinet Secretary for the National Treasury, who will report to Cabinet and the National Assembly.
• Public Disclosure: The Cabinet Secretary for the National Treasury and individual GOEs must make public information such as audited annual reports, performance evaluation results, and anti-corruption reports on their websites or other accessible platforms.
• Financial Transparency: GOEs must maintain financial records that accurately reflect transactions, enable preparation of audited financial statements, and disclose any transactions involving directors or their relatives.

Part VII – Provisions on Delegated Powers

• Authorizes the Cabinet Secretary for the National Treasury to make regulations for the effective implementation of the Act, including governance codes, merger/dissolution procedures, and transitional provisions.

Part VIII – General Provisions

• Dissolution and Merger: Outlines the conditions and procedures for the dissolution or merger of GOEs, requiring Cabinet approval and specific guidelines to be issued by the Cabinet Secretary for the National Treasury.
• Funds: Specifies the sources of GOE funds, including parliamentary appropriations, fees, and other provided monies.
• Repeals and Savings: The Bill repeals several existing Acts related to state corporations (listed in the Third Schedule) and includes comprehensive provisions in the Fourth Schedule for the transfer of functions, assets, and liabilities of former state corporations to the new company structures established under this Act. The First and Second Schedules list GOEs already under the Companies Act and State Corporations to be transitioned, respectively.