Government Owned Enterprises Act Kenya 2025: A Legal Guide for Corporations and Investors
- Muhoro & Gitonga Associates
- May 29, 2024
- 4 min read
Updated: Dec 8
Table of Contents
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1. Introduction
The Government Owned Enterprises Act Kenya 2025 (GOE Act) introduces a modern legal framework for managing state-owned commercial entities. It reforms how Government Owned Enterprises are structured, governed and monitored.
This guide outlines the essential features of the Act and its implications for public institutions, investors and Kenya’s broader commercial landscape.
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2.      What the Government Owned Enterprises Act 2025 Is
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The Act establishes the legal framework for creating, governing and operating Government Owned Enterprises (GOE). It replaces fragmented parastatal laws with a unified system that requires all commercial state entities to be incorporated as companies under the Companies Act.
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3. Why the GOE Act Matters
The Act is significant because it:
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Moves Kenya from traditional parastatal structures to modern, commercially run enterprises.
Promotes professional governance and reduces financial dependence on the national budget.
Creates uniform oversight and accountability standards for all state commercial entities.
Supports economic growth by enhancing transparency and commercial viability.
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4. Key Legal Definitions
Under the Act:
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Government Owned Enterprise (GOE)Â means a commercially operated, self-financing company where the national government owns more than half of the shareholding or has assigned financial and operational authority to carry out a business activity.
Board means the board of directors of a GOE constituted under the Act.
Independent Director means a board member who meets prescribed criteria to ensure impartiality and objectivity.
Chairperson must be an independent director elected by the board.
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5. Structural Reforms Under the Act
The Act introduces the following structural changes:
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Existing State corporations designated as commercial entities will be converted into public limited companies under the Companies Act.
Their assets, liabilities and operations will be transferred to the new GOE companies.
A uniform legal framework will replace multiple statutes and executive instruments that previously governed parastatals.
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6. Governance and Compliance Requirements
GOEs must comply with modern governance standards:
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Boards must include independent directors appointed through a transparent, merit-based process.
The chairperson must be an independent director.
GOEs must adopt annual business plans forming the basis for performance contracting with the National Treasury.
Annual reporting, financial audits and performance reviews are mandatory.
Strong conflict-of-interest rules apply to all board members.
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7.      Public Service Obligations and Commercial Operations
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GOEs are required to operate on commercial principles.
Public Service Obligations (PSO's) may only be assigned through clear legal instruments.
If assigned, PSOs must be funded separately from commercial revenue to protect the financial sustainability of the GOE.
This separation ensures commercial operations remain profitable and operationally sound.
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8. Transition and Implementation Steps
Entities transitioning into GOEs must:
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Follow Gazette-notified timelines and transitional guidelines from the Cabinet Secretary for National Treasury.
Incorporate new companies under the Companies Act.
Transfer assets, liabilities, programmes and staff to the new GOEs.
Constitute compliant boards with independent directors.
Prepare annual business plans and align performance contracts.
Ensure PSOs are documented, approved and financed separately.
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9.      Implications for Investors and Stakeholders
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The Act creates a pathway for private investment, including partial privatisation and public listings.
GOEs will be managed based on corporate governance best practices, enhancing investor confidence.
For regulators and the public sector, the Act improves transparency, accountability and efficiency across state enterprises.
Taxpayers benefit from reduced financial strain on the government due to commercial self-sustainability requirements.
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10. FAQs
1. What qualifies a company as a Government Owned Enterprise?
A company qualifies as a GOE if it is commercially operated, self-sustaining and majority-owned or financially empowered by the national government.
2. Does the Act apply to all State corporations?
It applies to all commercial State corporations that are being restructured into companies under the Act.
3. Who oversees GOEs?
Ownership and oversight are centralised under the National Treasury through the designated oversight authority or department.
4. Can GOEs perform public service obligations?
Yes, but only if formally assigned and separately funded to avoid burdening commercial operations.
5. What corporate governance rules apply?
GOEs must follow independent board composition, transparent appointments, conflict-of-interest restrictions and annual business planning.
6. Will loss-making state corporations be affected?
Yes. The Act enables restructuring, consolidation or privatisation to achieve commercial viability.
7. When does the Act come into force?
The commencement date will be appointed by the Cabinet Secretary through a Gazette notice.
8. Can private investors acquire shares in GOEs?
Yes, the Act allows for partial or full privatisation subject to government policy decisions.
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11. Conclusion
The Government Owned Enterprises Act Kenya 2025 transforms the governance and operations of state-owned commercial entities. By introducing corporate discipline, strengthening oversight and enabling private-sector participation, the Act positions GOEs to deliver sustainable growth and better value for the public.
Institutions, investors and enterprises should prepare for the structural, governance and compliance obligations under this modernised regime.
To learn more, see the Government Owned Enterprises Act.
