The Capital Markets Authority (CMA) and Limuru Tea are tussling over the corporate governance structure of the agricultural company with the regulator insisting that the listed firm falls short of desired standards.
CMA in a Corporate Governance Assessment Report on Limuru for the year ended December 2021, questioned the structure of the company’s board, falling short of accusing it of being captured by its majority shareholder, Unilever Tea, and being unfair to minority shareholders.
The regulator noted that with a shareholding of 27.31 percent, Reit Capital, one of the minority shareholders, was entitled to a seat on the board of the company.
“We note that Unilever Tea Ltd is the majority shareholder with 52 per cent stake whereas Africa Reit is a significant shareholder with a stake of 27.31 per cent," CMA wrote in its observations and recommendations.
"Unilever Tea is fully represented in the board whereas Africa Reit does not have a single representation at the board level,” said CMA in the findings of the report which was sent to the chief executive officer of Limuru Tea Gerridina Johanna Maria Ten Den on December 3 last year.
CMA recommended the restructuring of Limuru’s board to fairly reflect the company’s shareholding structure in the letter and spirit of the Corporate Governance Code.
“The board composition should not be biased towards representation by a substantial shareholder but should reflect the company’s broad shareholding structure,” said CMA.
But in a rejoinder, Limuru insisted that Africa Reit’s stake is only 4.6 per cent which does not entitle it to a board seat.
“This statement that Africa Reit is a significant shareholder should be expunged from the CG Assessment Report as it is not factual,” said Limuru, adding that there was no requirement in law to appoint directors to represent the interest of minority shareholders.
CMA also noted that the board did not represent a mix of skills, experience and requirements of the Corporate Governance Code.
But Limuru insisted that it had ensured a suitable mix of skills and experience from the various directors.
Limuru agreed that 50 per cent of the directors were executive, contrary to the requirement that a majority, (50+1 per cent), be non-executive.
The firm, which is listed on the Nairobi Securities Exchange, said that it was still scouting for an independent director.
“However, the process has stalled following a suit instituted by Africa Reit against the board,” said Limuru.
Together with billionaire businessman Joe Wanjui, Africa Reit wants Unilever Tea blocked from selling its 52 percent stake in the company as part of a Sh596.7 billion ($5.1 billion) global deal.
