Court of Appeal has quashed appointment of directors of troubled Savannah Cement by a judge in the wake of an ownership fight in the Athi River-based firm.
A bench of three judges said the move by High Court Judge Farah Amin to appoint the board on her own amounted to usurping the powers of the shareholders.
The court fight was triggered by the purchase of a stake in the company, which was initially held by Chinese investors, by a Kenyan director.
The shares were purchased by Peter Ndeta for Sh1.5 billion and transferred to Seruji Ltd, a move founder shareholders, Donald Mwaura and John Gachanga, challenged the share as illegal and sued.
After moving to court, Justice Amin appointed an interim board to run the affairs of the company, pending the determination of the case.
“We agree with the appellants (Mwaura and Gachanga) that the appointment of interim directors by the learned judge amounted to usurping the powers of the shareholders of the 1st respondent (Savannah Cement). It follows therefore that the learned judge acted ultra vires,” Justices William Ouko, Daniel Musinga and Gatembu Kairu ruled.
The judges said courts will only interfere with the internal management of a company where actions complained of are illegal, fraudulent or not rectifiable by an ordinary resolution. They said troubles at the Athi River based cement firm did not call for the judge to make such a move.
The company was formed by a group of Kenyan and Chinese investors to join the lucrative cement market.
The Kenyan shareholders came under Savannah Heights Ltd with Mr Mwaura holding 30 percent, Mr Gachanga though Isinya Plains Limited holding 35 percent and Benson Ndeta, 35 percent. The Chinese invested in the company through two companies- Wanho International Limited and ACME Wanji Investment Limited.
Wanho International and ACME Wanji Investment owned 60 percent of Savannah Cement Limited while Savannah Heights acquired the remaining 40 percent in a deal that was cemented through a Memorandum of Understanding.