Politics and policy
CMC directors face ban from boards of other public firms
Posted Tuesday, May 29 2012 at 20:36
Directors of troubled motor dealer CMC Holdings found to have violated capital market rules or breached corporate governance regulations will be barred from sitting in the boards of public companies, Parliament heard on Tuesday.
The Capital Markets Authority (CMA) told Parliament’s Finance Committee that it is waiting for the High Court decision on a related matter before acting on directors who have been named in a forensic report as having breached various regulations or were part of criminal activities that have cost the company millions of shillings.
CMA did not name the directors but indicated that the list of offences for which it will act includes illegal takeover of the motor dealer and operating offshore accounts into which millions of company funds were funnelled for the benefit of a few directors and employees.
The committee also asked the markets regulator to take similar action against the CMC directors who hired Pewin Motors as a sales agent in a deal that a forensic audit report found to have cost the company millions of shillings in losses.
A former permanent secretary in the Office of the President, Jeremiah Kiereini, and former attorney-general Charles Njonjo are the only CMC directors named in the report with seats in boards of other listed companies.
A forensic audit report by Webber Wentzel, the South African auditor that the CMA hired to investigate alleged malpractices at CMC, found that Mr Kiereini, Mr Njonjo and former MD Martin Forster were signatories to the offshore accounts into which more than Sh250 million were kept illegally.
Mr Kiereini has since defended himself, pleading innocence of the accusations of illegal transactions at the firm.
CMA’s market operations director Wycliffe Shamia told Parliament that the CMA had through its investigations found that Andy Forwarders – owned by CMC’s single largest shareholder Peter Muthoka – had violated the takeover regulations by accumulating shares above the 25 per cent threshold.
“Mr Muthoka has reached the point at which takeover rules should have applied, that is at 25 per cent. We have confirmed that the aggregate shareholding directly by him and those related to him is 25.07 per cent,” Mr Shamiah told the committee sitting at Continental House in Nairobi, on Tuesday.
Market regulations demand that Mr Muthoka should have disclosed and further indicated whether he wanted to take over the company or applied to be exempted from the requirement as the rules state.
CMA chairman Kung’u Gatabaki said that the regulator was hoping to conclude the CMC issue soon so that it could move to dealing with three other listed companies whose corporate governance structures have been found to be questionable.
Mr Gatabaki said the CMA had made proposals on how to convert the current governance guidelines into law to improve corporate governance in public companies.
Although the rules exist, public companies are not obligated to follow the guidelines.