Politics and policy
Regulator stokes CMC board wars with ouster of directors
Posted Monday, February 6 2012 at 21:22
The capital markets regulator on Monday stoked the management flames at motor dealer CMC Holdings with a fresh order seeking to send the entire board packing and replace it with a new one.
CMA said it would appoint a caretaker board to replace the warring directors – a move that would effectively throw out the key protagonists in the four-month long boardroom battle that began in September.
The regulator communicated its intention to the company’s warring directors yesterday in a meeting that discussed the preliminary findings of a forensic audit report by Webber Wentzel of South Africa.
CMA said it had also relied on an earlier report by PricewaterhouseCoopers (PwC) which alleges that CMC lost more than Sh1.1 billion in inflated logistics charges by Andy Forwarders, a company majority owned by Mr Muthoka.
“The board is dysfunctional and we believe that it is not in a position to run the company,” said Kungu Gatabaki, the chairman of CMA. “Any person adversely mentioned in any of the two reports will not be a member of the caretaker board that will oversee CMC’s operations for about a year,” he said.
The decision, which was communicated in a press statement, met sharp reaction from the lead shareholder Peter Muthoka’s lawyers who termed in illegal and in breach of court orders that the Capital Markets Authority (CMA) had itself sought and was granted in November.
“The move is in total contempt of court following the orders that CMA sought and was granted on November 16, 2011,” said Fred Ojiambo of Kaplan & Stratton, the law firm that represents Mr Peter Muthoka, the lead shareholder at CMC in the suit against CMA.
Mr Ojiambo said the court had on November 16 issued two orders in response to CMA’s prayers -- that the CMC board could not be altered until the matter before court is heard and determined besides restraining the petitioner (Mr Muthoka) from holding a special general meeting.
“This means the composition of the CMC board cannot be changed until the case has been decided. CMA cannot act in breach of orders it sought and obtained from court,” he said.
But Mr Gatabaki said the decision as to whether CMA’s action is in breach of earlier court orders is a matter of legal interpretation.
CMA had its statement said the current CEO and finance director Bill Lay and Mary Ngige would remain in office and that the current board – composed mainly of major shareholders and their nominees — should propose five names to CMA for approval and appointment.
The regulator is to appoint three independent directors including the chairman, effectively replacing current chairman Mr Joel Kibe who has a 10 per cent stake in CMC.
Details of the report by Webber are yet to emerge but the stance taken by CMA are set to lock out Mr Muthoka who holds a 24.7 per cent stake in the country’s fourth largest auto dealer.
CMA’s latest action could make it difficult for CMC’s long-serving chairman Mr Jeremiah Kiereini to return to the company’s board after his ouster in March last year.