The ownership and control of Directline Assurance has been reset once again, following a new legal decision that has altered the stakes held by various investors, including media mogul SK Macharia.
This follows the Insurance Appeals Tribunal quashing a directive from the industry regulator that sought to nullify past shareholding changes in the firm.
In a letter dated March 5, 2024, the Commissioner of Insurance had declared all share transfers since the company's inception void, citing the lack of written approval from the Insurance Regulatory Authority (IRA) and other shareholders.
The directive effectively sought to revert Directline's shareholding structure to its 2005 position. However, the tribunal’s decision means that the latest shareholding, as recorded in February 2023, is now in force.
Mr Macharia has accused other shareholders of fraudulently altering the company’s ownership.
However, in a ruling delivered on October 2, the tribunal found that the Commissioner of Insurance and his predecessors had been fully aware of the shareholding changes and had continued to licence the insurer.
“It is our finding that from the correspondence and reports adduced, the Commissioner of Insurance had knowledge of the share changes — some of which were undertaken following his own circular on increasing paid-up share capital,” said the tribunal, chaired by Gichinga Ndirangu.
Directline was established in 1998 with shareholding split among AKM Investments Ltd (48 percent), Janus Ltd (32 percent), and Royal Media Services Ltd (20 percent).
In 2005, the shareholders were Royal Credit Ltd with 997 shares (0.01 percent shareholding), Mr Macharia, Purity Macharia and Dan Karobia, one share each (0.000008 percent, each), and AKM Investments Ltd 4,978,108 shares (40.6 percent). Janus ltd 2,318,738 (20 percent), Royal Media Services 1,448,212 (11.83 percent), Triple A Capital Ltd 3,500,000 (28.58 percent). The total shareholding adds up to 101 percent due to rounding.
A company registry document (CR12) dated February 12, 2023, showed that AKM Investment held 10.36 percent, Stenny Investments (in trust for AKM) held 20 percent, Triad Networks Ltd and Sureinvest Ltd each held 20 percent, Janus Ltd (20 percent), Mr Macharia (0.0000000067 percent), Ms Macharia (0.0000000067 percent), Royal Media (9.7 percent), Royal Credit (0.0066 percent), and the late Karobia (0.0000000067 percent).
The letter by the commissioner, which has now been quashed by the tribunal, stated that the shareholding would revert to the position in 2005.
The tribunal emphasised that a public office holder is bound by the lawful decisions of their predecessors, citing the principles of legitimate expectation, institutional continuity, and good governance.
Mr Macharia claimed that he had co-founded the company with his wife, Royal Credit and Karobia.
He said that he later entrusted its management to his son, John Gichia Macharia, who brought in other directors, including Triple A Company and Terry Wijenje through Janus Ltd.
Following his son’s death in a road accident in 2019, Mr Macharia alleged that he discovered irregularities in the company’s shareholding, accusing other parties of fraud.
He argued that the IRA had a duty to rectify the situation, claiming that his rivals had falsely portrayed themselves as majority shareholders without paying for their stakes.
He also pointed out that the Insurance Act requires anyone acquiring more than 10 percent of an insurer to obtain the IRA’s written approval — something he says was never done.
In its response, the IRA stated that it had received multiple complaints alleging shareholding violations. The Commissioner said he began a review of the company’s ownership structure and found that changes had been made without prior approval.
The review also noted that Triple A Capital had been wound up and that AKM Investments held more than 25 percent of paid-up shares, thus contravening Section 23 of the Insurance Act.
The IRA said the letter had directed shareholders to regularise the firm’s shareholding and directorship within 45 days, warning of further regulatory action.
However, the Authority later clarified that the letter was not a conclusive determination of ownership, but rather a request to align the company’s records with regulatory requirements.
AKM Investments and Janus argued that disputes only emerged after Mr Macharia attempted to reclaim control of the company following his son’s death.
They insisted that the IRA had been fully aware of the shareholding changes over the years and had never raised objections during the transfer process.
“The Commissioner repeatedly licensed the company after receiving both internal and external notifications of the changes,” said Kevin McCourt in an affidavit. Mr McCourt is a director of Sureinvest.
He added that some share changes were made specifically to meet the regulator’s capital requirements of Sh300 million for general insurers.
The shareholders also warned that reversing the transactions would result in significant financial losses, given the substantial investments involved in the share sale agreements.
