Adan Mohamed (left), Industrialisation and Enterprise Development Cabinet Secretary and Mark ole Karbolo, EAPCC chairman. Photos/FILE
What you need to know:
The markets regulator Wednesday confirmed that it had received a protest letter from the Treasury and the National Social Security Fund (NSSF) — who jointly own 52 per cent of Portland — seeking to nullify all the resolutions passed at the AGM.
Treasury and the NSSF are opposed to any resolutions passed on all other agenda items, including adoption of EAPCC’s financial statements and payment of dividends at Sh0.75 per share.
The Athi River-based firm is Kenya’s second-largest cement producer with a market share of 20 per cent behind market leader Bamburi Cement.
The Capital Markets Authority (CMA) has launched investigations into claims of creative accounting and breach of corporate governance rules during Tuesday’s East African Portland Cement Company (EAPCC) annual general meeting.
The markets regulator Wednesday confirmed that it had received a protest letter from the Treasury and the National Social Security Fund (NSSF) — who jointly own 52 per cent of Portland — seeking to nullify all the resolutions passed at the AGM.
“We have received the letter and it touches on weighty matters such as financial issues and the conduct of EAPCC board members,” said Paul Muthaura, the acting chief executive at CMA.
“We are looking into the matter and we are in touch with relevant stakeholders like the Auditor-General and registrar of companies.”
The Treasury and NSSF have questioned the accuracy of EAPCC’s books of accounts as well as the conduct of board chairman Mark ole Karbolo, managing director Kephar Tande and two other directors Titus Naikuni and Hamish Keish.
Industrialisation PS Wilson Songa — representing the Treasury which owns 25 per cent of Portland — teamed up with NSSF (27 per cent) to try to take control of the Nairobi bourse-listed firm’s boardroom dominated by Lafarge-allied directors.
The boardroom undercurrents at Portland burst to the public domain on Tuesday when Dr Songa and NSSF executive Gideon Kyengo stormed out of the shareholders’ meeting and immediately fired a letter to the CMA, protesting the manner in which the AGM was conducted.
Sources who attended the shareholders’ meeting, where journalists were locked out, revealed that the AGM got stormy after Mr Karbolo overruled a request by the Treasury and NSSF to have each resolution put to a vote.
“Mr Mark Karbolo unilaterally rejected the call for the poll and decided to proceed with each agenda item, without stating whether the resolutions were passed or not,” reads Dr Songa’s letter to the CMA dated December 17.
“We are writing to request you to require the company not to carry into effect any of the resolutions purportedly passed at the AGM which should for all purposes be deemed to have adjourned and direct the company to reconvene the AGM under an independent person.”
Dr Songa said the Treasury and the NSSF only supported the re-election of NSSF and appointment of Ernst & Young as auditors in the current year.
Dr Songa’s letter means the Treasury and the NSSF are opposed to any resolutions passed on all other agenda items, including adoption of EAPCC’s financial statements and payment of dividends at Sh0.75 per share.
Dr Songa alleged that EAPCC is ‘in the red’ and that the company’s management had cooked the statement of accounts, turning the spotlight on the National Audit Office and its agent Ernst & Young who audited the books.
Portland has been embroiled in a long and bruising shareholder war that is mainly centred around the government’s determination to have a new team shepherd the cement firm.
It all began in December 2011 with the failed attempt to oust directors of the company, including Mr Tande, the managing director. Portland posted a net profit of Sh1.77 billion for the year to June compared to a loss of Sh972 million in the same period a year earlier.
The Athi River-based firm is Kenya’s second-largest cement producer with a market share of 20 per cent behind market leader Bamburi Cement.
Tuesday’s shareholders’ meeting proceeded despite the Treasury and the NSSF’s protest.
All the agenda items were passed through acclamation — a process the majority shareholders said was in breach of good corporate governance rules and the company’s Articles of Association.
Portland’s company secretary John Maonga, however, countered Dr Songa’s allegations with a letter to the CMA, informing the regulator that shareholders successfully passed all agenda items at the AGM.
Matters ran to a head during Tuesday’s meeting when the government failed to have former CMC chief executive Bill Lay elected to the Portland board to replace lawyer Hamish Keith who represents Lafarge.
Mr Karbolo ruled that the Industrialisation ministry, acting as proxy for the Treasury, had not properly filed the notice nominating Mr Lay to succeed Mr Keith.
The majority of shareholders present also got hostile to Mr Lay, pointing out his stormy leadership at CMC that was rocked by boardroom wrangles leading to the auto dealer’s suspension from trading on the NSE in September 2011.
Mr Maonga said the State’s notice to have Mr Lay sit on Portland’s board was time-barred having been delivered on December 10 – one day after the December 9 deadline for such notices.
“The Articles of Association provide that a notice for change in directorship be filed seven days before the AGM, excluding the day of meeting and service, making December 9 the last probable day,” Mr Maonga said in an interview.
The State, working with NSSF, had planned to snatch Lafarge’s board seat in the hope of tilting the Portland boardroom to its favour. The government has two seats on Portland’s seven-member board and has traditionally teamed up with NSSF to execute its agenda for the firm.
Lafarge successfully flexed its boardroom muscle at the AGM and had Didier Tresarrieu, a former managing director of rival Bamburi Cement, replace Mr Keith.
Lafarge, which is the majority shareholder at Bamburi, is also represented on the Portland board by Mr Naikuni, the CEO of Kenya Airways.
Bamburi Cement and its parent company Lafarge own 41.7 per cent of Portland Cement.
More recently, the Treasury and NSSF have found it difficult to push their agenda through the Portland board because the chairman Mr Karbolo – though appointed by the government — and Mr Tande have been leaning towards Lafarge, effectively giving the French conglomerate an upper hand in the boardroom against the government’s three.
It is this ratio in favour of Lafarge that has seen the Treasury and NSSF push to have Portland’s board expanded to 11 and have the positions filled on the basis of shareholding.
Dr Songa had already written to the board seeking to amend the Articles of Association to expand the board size, but the proposal was also thrown out because it was filed late.
“That is a special resolution which requires a special 28-day notice after issuance of the AGM notice,” said Mr Maonga.
The board approved and issued the notice to hold an AGM on October 26.
The Treasury and the provident fund’s combined 52 per cent shareholding would guarantee the government six seats on the 11-member board, handing it control of the cement firm.
