Court orders CBK, KDIC to consider options for reviving Imperial Bank
An Imperial Bank branch. The Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation (KDIC) have been ordered to consider proposals for reviving the collapsed Imperial Bank. PHOTO | FILE
What you need to know:
Central Bank and the KCIC have been ordered to consider proposals for reviving the collapsed Imperial Bank.
Court ordered the banking industry regulator to meet Imperial Bank shareholders, bondholders and depositors and work towards a solution.
Imperial Bank’s shareholders had claimed that the CBK and KDIC have acted unfairly in declining two of their proposals.
Imperial Bank’s shareholders had proposed injecting Sh10 billion then raising another Sh20 billion through a rights issue, or allowing depositors to convert their savings into shares to raise capital.
The Central Bank of Kenya (CBK) and the Kenya Deposit Insurance Corporation (KDIC) have been ordered to consider proposals for reviving the collapsed Imperial Bank.
Justice George Odunga has ordered the banking industry regulator to meet Imperial Bank’s shareholders, bondholders and depositors and work towards reaching a solution that will be in the interest of all the parties but that is within the law.
Imperial Bank’s shareholders had claimed that the CBK and KDIC have acted unfairly in declining two of their proposals.
Justice Odunga ruled that while he is unable to interfere with the CBK’s decision to reject the two proposals by Imperial Bank’s shareholders, they are obligated to consider any proposals that could help in reviving the lender.
Imperial Bank’s shareholders had proposed injecting Sh10 billion then raising another Sh20 billion through a rights issue, or allowing depositors to convert their savings into shares to raise capital.
The CBK had asked the shareholders to place proposals that will help in securing the Sh44.9 billion that was looted by former managing director Abdulmalek Janmohammed. The fraud scheme was brought to the fore shortly after his death in September last year.
Not to take any action
Justice Odunga in his ruling also ordered the CBK and KDIC not to take any action that will lead to the liquidation of Imperial Bank unless it is the only option as per the Banking Act.
“An order of mandamus directed at the KDIC and CBK and each of them compelling them to formally engage the shareholders herein, together with the other stakeholders including the bondholders and depositors of the Bank, with a view to jointly, and to the extent permissible by law, finding a workable legal framework for an outcome that is in the interests of the bank and all its stakeholders,” Justice Odunga ruled.
The Imperial Bank shareholders had claimed that the banking industry regulator discriminated against them in denying them details of the receivership period.
But Justice Odunga refused to rule in their favour after the CBK argued that some of the information and documents demanded by the shareholders was part of investigations that are at a crucial stage.
The CBK says it is investigating possible involvement of the shareholders in the Sh44.9 billion fraud scheme that lasted over 13 years.
The judge ruled that the CBK will have to share information demanded by the shareholders as long as it does not interfere with investigations.
“While this court is not competent to determine that allegation, it would prejudice the said investigations if the very subject of investigations were placed at the disposal of the shareholders.
"I am, however, of the view that where specific information is sought which cannot prejudice the investigations, the CBK and KDIC are obliged to furnish the same,” the judge further ruled.
“An order of prohibiting the CBK and KDIC, jointly and/or severally, whether by themselves, their servants, agents, officers from taking any steps which would result cumulatively or otherwise in the liquidation of the Bank unless and until the relevant legal provisions are complied with,” he added.
