An insurance company has moved to court seeking to overturn its decision that barred them from selling assets owned by the company.
In an application filed before the Milimani Commercial and Admiralty Division under certificate of urgency, Old Mutual Holdings PLC argues that the ex-parte orders are unlawful, as they were granted for an indefinite period in violation of Order 40 Rule 4(2)of the Civil Procedure Rules.
The rule limits ex-parte orders to a maximum of 14 days, and Old Mutual contends that the impugned orders are therefore “contrary to the law”.
The High Court issued the orders following a petition filed by a shareholder, Joel Kamau Kibe challenging the decision of the company.
He together with other minority shareholders argued that they have been systematically excluded from participating in the management and decision making processes of the company.
Similarly he claimed that majority shareholders denied him and other minority shareholders access to crucial company records, including financial statements, minutes of board meetings, and other documents.
Kibe argued that the lack of transparency contravenes section 779 of the Companies Act 2015, which entitles shareholders to inspect company records and be kept informed about the company’s affairs.
“It is therefore evident that the affairs of Old Mutual PLC herein are being conducted in a manner oppressive to some part of its members including the Petitioner,” he argued.
He claimed that the company is not making profit because of misappropriation of funds and insider trading fraud adding that UAP Holdings PLC rebranding to Old Mutual Holdings PLC completely lost its Corporate Identity.
“The transaction was secretive and the Petitioner and/or other minority members were not consulted on the entire exercise. To date the share Certificates of the New holding company have never been issued and the sale of shares over the counter was halted leaving the Petitioner with nothing to show for his immense investment,” reads court papers.
The court barred the board of directors from performing several key functions, including making payments to service providers, securing credit facilities, selling assets, and altering the company’s ownership structure.
Among the assets the High Court has barred from selling include Equity Centre, Union Plaza and Telecom Plaza which the insurance company has since distanced itself from their ownership.
The company alleges that all assets purchased are available for “management and disposal in line with prudent business practices” making their disposal usual keeping with the purpose for which they were purchased.
Old Mutual PLC wants the court to discharge the ‘impugned’ orders arguing that their continued existence is causing significant harm by obstructing the company’s ability to meet its financial and contractual obligations to the government, employees, suppliers, and financiers.
Additionally, the company says that these orders are negatively impacting its ability to manage investments in the best interest of its shareholders.
“The ex-parte orders prohibit the applicant from making payments in excess of Sh10,000,000 to anyone. Depending on how this order is interpreted, the Applicant could be prevented from making statutory payments including taxes to the Kenya Revenue of Authority (KRA), deductions to National Health Insurance Fund (NHIF) and National Social Security Fund (NSSF), pension funds, insurance premiums for the properties owned by the Company, all of which in each instance exceed the sh10,000,000 ,” read the court documents.
“The Applicant now risks statutory penalties for delayed payments and it is exposed to financial loss due to lack of insurance cover, further jeopardising shareholder value.”
The company argues that Kibe has no right to pursue claims related to its affairs despite his 0.73% shareholding through a Genghis Capital nominee account.
According to the company, under Section 92 of the Companies Act, 2015, a person must be listed in the company’s register of members to be considered a member.
As Kibe’s name is absent from this register is says, he is not recognized as a member therefore lacks standing to claim oppressive conduct or seek the company’s liquidation under the Companies Act and Insolvency Act, 2015.
According to Chief Executive Officer Arthur Oginga, the decision to sell the company’s assets was approved by an overwhelming majority of 99.16% votes cast during an extraordinary general meeting held on November 14, 2023.
Oginga accused Kibe of misleading the court by saying that the company was the purchaser of its own shares.
“By requesting the Court to injunct any change of ownership in the Company, the Respondent is in effect fettering the rights of shareholders who may wish to dispose of their shares including through the Over the Counter mechanism,” said Oginga.
“The ex-parte orders are therefore unjust given their far-reaching effects on parties who are not involved in the suit.”
Old Mutual PLC now wants the court to permit it to sell or transfer the property at LR No. 209/13453 (Nairobi/Block 31/323), Old Mutual Tower, Upper Hill Road, at market value.
The company also wants the court to allow it to secure credit facilities for business operations, make necessary payments to service providers, policyholders, and investors, adjust the Board of Directors, and trade company shares on an arm’s length basis, including via Over the Counter (OTC) as regulated by the Capital Markets Authority.
“Unless the orders sought herein are granted, and the Applicant’s Notice of Motion application is admitted for hearing during the current court vacation, there is a real and imminent danger that the Impugned Orders will have dire consequences on the Applicant, its business, its over 1,200 shareholders and other stakeholders,” read the court documents
The court has since certified the application as urgent and allowed it to be heard during the court’s vacation period in accordance with the High Court Vacation Rules.
Lady Justice Josephine Wayua Wambua Mongare has also ordered the application to be served to the Respondents who are required to submit their responses within five days.
The matter will be mentioned for further directions on September 17, 2024.